All articles by Stafford Thomas
Stafford Thomas
Risk transfer market roars back to life
Ending a declining trend, the UKs final salary pension scheme risk transfer market rebounded in the third quarter of 2009 with total deals struck surging to a record £3.86 billion ($6.3 billion), reveals actuarial consultancy Hymans Robertson.In the well-established pension scheme buyoutbuy-in sector, the value of the 46 deals struck totalled £958 million an increase of 58 percent compared with a total of £604 million from 37 deals in the previous quarter.However, while third-quarter deals represent a solid recovery they fell far short of the 84 deals worth a total of £2.1 billion struck in the third quarter of 2008
Dark days for bancassurance
Bowing to pressure from the European Commission (EC) and major creditor the Dutch government, ING Group has turned its back on bancassurance, a model it has championed since its formation almost two decades ago.Under an agreement reached with the EC in late-October, ING will dismantle its bancassurance edifice, leaving its banking and insurance operations as completely separate entities.The dismantling process is set to take four years and will be achieved by a divestment of all insurance operations via options including initial public offerings, sales or combinations thereof.Indicative of the scale of the disinvestment, ING ranked as the worlds sixth-largest global insurance company in 2008 based on its total revenue of $64.5 billion, according to research firm Datamonotor.Disinvestment of insurance operations includes INGs investment management units which currently have total assets under management of almost $600 billion Notably, the CEO of INGs investment management unit, Jacques de Vaucleroy, announced his resignation shortly after the announcement of the sweeping changes confronting ING.In ceasing to be a bancassurer ING joins the exodus from the model that saw Allianz sell Dresdner Bank to Commerzbank in 2008, this years Belgian government-led break-up of Fortis and, most recently, Standard Lifes sale of its banking unit to Barclays Bank.A brave frontPutting on a brave front ING has variously described its demise as a bancassurer as the logical next step and next chapter in its Back to Basics transformation programme announced in April 2009.Aimed at what ING termed simplifying the organisation, the programme set out to reduce complexity by operating banking and insurance separately under one group umbrella and by disposing between 6 billion ($8.9 billion) and 8 billion in non-core activities as market conditions permitted.However, prior to the devastating impact it suffered at the hands of the global financial crisis ING had undoubtedly intended to remain a
Standard Life bows out of banking
Ending an 11-year and once highly ambitious foray into banking, UK insurer Standard Life has sold Standard Life Bank (SLB) to Barclays Bank in a cash deal worth a minimum of £226 million ($370 million), or about £35 million less than the banks net asset value as at 31 August 2009.The sale is in keeping with the insurers strategy of focusing on growth as an asset managing business, commented Sandy Crombie, Standard Lifes outgoing group CEO.Reflecting how strategy and economic times have changed, Crombie, stated in June 2003: Standard Life Bank is central to our strategy in the UK and will be an increasingly important contributor to our overall success.At that stage SLB was being groomed for aggressive growth in the UKs then-booming mortgage market and had already built its mortgage book to £8 billion and retail savings business to £4.6 billion.SLBs mortgage book peaked at over £10 billion but under Standard Lifes policy since the onset of the financial crisis of limiting lending activity had dwindled to £8.8 billion by 30 June 2009
SEC to focus on retirement products retirees can ‘understand’
The US Securities and Exchange Commission (SEC) is on the hunt for newly emerging risks Mary Schapiro, the regulatory bodys chairman told delegates to the Securities Industry and Financial Markets Associations annual conference held in New York in late-October.In this hunt a focus will be on new products, particularly those related to retirement investing, she stressed.This focus, explained Schapiro, is especially important as employers replace defined benefit plans with defined contribution plans, placing the burden of investment decisions on employees.In my view, barraging investors with retirement products that feature the latest financial gimmick or marketable fad will ultimately be a disservice to investors, their financial intermediaries and the economy overall, said Schapiro.Recent events have reinforced that short-term gains from complex, fee-loaded products can threaten the economy.She continued that investors and future retirees should have access to products they can understand and evaluate, adding this means that complex fee arrangements or product descriptions should be discarded in favour of simple, clear disclosure.The SEC will, she said, pay particular attention to disclosure, product development and marketing for retirement products.The SECs recently created Division of Risk, Strategy and Financial Innovation will have significant responsibility for spotting issues related to new products.The new division, explained Shapiro, will be a knowledge-based centre of expertise and employ people with current street experience in areas such as risk, trading, derivatives and hedge funds.Notably, among market sectors already being probed are life settlements.I have established a task force to review the growth of the life settlements market, focusing on sales practices, disclosure, and the emerging prospect of securitisation of life settlements, said Shapiro.Target date funds are also under investigation, she added
Easing the multi-state licensing burden
State-level regulation of US insurers results in significant duplication, not the least being multi-state product licensing A solution, the Interstate Insurance Product Regulation Commission, has been in place since 2006 and though results achieved have been satisfactory they are not completely convincing Proponents of a Federal charter for US insurers have long cited the need to register new products in each state individually as a major failing of the current system
Subscribe to our Newsletter
Get industry leading news, data and analysis delivered to your inbox
Twenty years to build, four years to dismantle
ING Groups plan to dismantle its sprawling insurance empire marks the end of one of the grandest fully integrated bancassurance models and one executed by a company that was from the start a bancassurer.ING Groups creation was facilitated by the Dutch governments lifting of legal restrictions on mergers between insurers and banks in 1990, a development that prompted merger negotiations between Dutch insurer Nationale-Nederlanden and Dutch bank NMB Postbank Groep.The negotiations culminated in 1991 in formation of Internationale Nederlanden Groep, a name later changed to ING Groep NV.From its roots as a Dutch company with limited international business, ING rapidly spread globally via organic growth such as creation of online bank ING Direct and acquisitions.INGs first large acquisition was in the banking industry and came in 1995 when in a move that gave its brand instant global recognition it took over UK merchant bank Barings for a token £1 following its collapse.INGs first major insurance acquisition came in 1997 with the acquisition of US insurer Equitable of Iowa.This was INGs largest acquisition since its founding and ramped-up its premium income in the US from $2.2 billion to $4.3 billion and assets under management from $10 billion to $20 billion.Acquisition of Equitable of Iowa built on a US-base established by Nationale-Nederlanden which had in 1979 acquired Life of Georgia.Another major push into the US market followed in 2000 when INGs acquired US insurers Aetnas non-health care US business and it international businesses for $7.7 billion
Generali harnesses iPhone power
Accessing information on the move is increasingly becoming accepted as the norm, a trend that is being accelerated by the advent of smartphones such as Apples iPhone.Viewing this trend as an opportunity to deliver enhanced services, Generali France, a unit of Italian insurer Generali Group, has teamed up with consulting and technology services provider Accenture to develop an iPhone application to meet the needs of financial advisors serving life insurance customers.To be made available at the beginning of 2010, the iPhone application will provide Generali Frances financial advisors real-time access through their mobile device to their client portfolio In addition, they will be able to access detailed information for each client account, including savings, payment history, investment portfolios and the financial performance of each fund in which savings are invested.Following an Accenture workshop on how changes in consumer behaviour are driven by the increased usage of smartphones, Generali France decided to work with the company to develop concrete business applications for its life insurance operations, commented Stphane Dedeyan, a member of the board of management of Generali France.She added: This new application for iPhone will be particularly helpful to our financial advisers, who are looking for innovative ways to stay close to their clients.A business-to-consumer version of the application will also be made available for the clients of Generali Frances financial advisors and for the direct clients of Generali Frances internet subsidiary that will provide them with direct access to their own accounts.Additional features to the application are in the pipeline and include news alerts and a savings simulator.A general insurance version which would enable Generali Frances clients to manage their claims from declaration to settlement is being studied by Generali France
US to clamp down on rating agencies
Standing accused of playing a key role in fuelling the global financial crisis, rating agencies have come under close scrutiny by legislators in the US culminating in the House of Representatives Financial Services Committees passing of the Accountability and Transparency in Rating Agencies Act in October.Though the Act must pass through the final legislative process, overwhelming bipartisan support in the committee means it is very likely it will become law.The Accountability and Transparency in Rating Agencies Act aims to curb the inappropriate and irresponsible actions of credit rating agencies which greatly contributed to our current economic problems, commented the committees chairman Paul Kanjorski.This legislation builds on the Administrations proposal and takes strong steps to reduce conflicts of interest, stem market reliance on credit rating agencies, and impose a liability standard on the agencies, he added.Among the acts features are: Increasing accountability of rating agencies by enabling them to be sued by individuals; Requiring rating agencies to have a board with at least one-third independent directors focused on preventing conflicts of interest; Oversight of rating agencies by the Securities and Exchange Commission; Requirements designed to mitigate the conflicts of interest that arise out of the issuer-pays model for compensating rating agencies; and Significant enhancement of responsibilities and accountability of credit rating agency compliance officers.In addition, the act contains revolving-door protections which require that when certain rating agency employees go to work for an issuer, that the rating agency conduct a review of ratings in which the employee was involved over the past year to ensure that its procedures were followed and proper ratings issued.Across the Atlantic the US legislation has a parallel in a regulation adopted by the Council of the European Union (EU) on 27 July 2009
Ping An puts torrid 2008 in the past
Having suffered a profit-mauling a year earlier, the fortunes of Chinas second-largest life insurer, Ping An, rebounded in the third quarter of 2009 with its net profit coming in at CNY3.37 billion ($493 million), up from a net loss of CNY7.92 billion in the third quarter of 2008. Sixth paragraph should read: In the general insurance market Ping An grew by premium income by 38.5 percent to CNY29.02 billion in the first three quarters of 2009.While investment market strength in the third quarter of 2009 played a role in Ping Ans recovery, the most significant contributor was the absence of the CNY15.7 billion write-off taken in the third quarter of 2009 against the 5 percent equity stake it bought in 2007 in the then Belgian-Dutch bancassurer Fortis for $3.5 billion.Overall the third-quarter 2009 profit turnaround left Ping Ans net profit in the first nine months of year at CNY8.806 billion, up from CNY1.804 billion in the corresponding 2008 period.The insurers net assets also performed well, increasing by 20.5 percent from CNY85.7 billion at the end of 2008 to CNY103.23 billion at the end of September 2009
Reverse mortgages under fire in the US
At least two major life insurers have been named in a damning report on the US reverse mortgage market undertaken by non-profit consumer advocacy organisation the National Consumer Law Center (NCLC).The report Subprime Revisited: How the Rise of the Reverse Mortgage Lending Industry Puts Older Homeowners at Risk was authored by Tara Twomey, an NCLC attorney.In an overview of the report the NCLC notes: Annual reverse mortgage volume has topped 110,000 units and $17 billion, with top banks like Wells Fargo and Bank of America and large insurance companies like Genworth and MetLife leading the way