DEVELOPING MARKETS
MassMutual enters Chinese
market
Go deeper with GlobalData
MassMutual, one of the top-five life
insurers in the US, has finally entered the Chinese mainland
insurance market with the acquisition of a 19.9 percent stake in
Yingda Taihe Life Insurance Company from its controlling
shareholder State Grid Corporation of China (State Grid).
Selection of MassMutual as a strategic partner
is the culmination of what State Grid termed a “broad search” and
“careful selection” process since Yingda Life’s establishment in
2007. A state-owned company, State Grid supplies electric power to
over one billion people in China.
A comparatively new entrant in to the Asian
life insurance market, MassMutual made it first move into the
region in 2000 with the acquisition of Hong Kong-based CRC
Protective Life from US insurer Protective Life and Hong Kong bank
HKCB Bank Holding Company.
MassMutual went on to enter Taiwan’s life
market in 2001 with the acquisition of a 50 percent stake in
Mercuries Life, now MassMutual Mercuries Life, from Taiwanese
conglomerate Mercuries Group.
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By GlobalDataIn the same year, MassMutual gained entry into
Japan’s market with the acquisition of Aetna Heiwa Life Insurance
from Aetna International, now MassMutual Japan, a former unit of US
insurer Aetna sold to Dutch insurer ING Group in 2000.
MERGERS AND ACQUISITIONS
Sun Life seizes UK growth
opportunity
In a deal that will enhance its
position in the UK market, Canadian insurer Sun Life Financial is
to acquire US insurer Lincoln Financial’s UK unit for £195 million
($317 million).
Among key gains for Sun Life, the deal doubles
the number of policies it has in force in the UK to 1.1 million and
increases assets under management by nearly 60 percent to £10.6
billion.
“Sun Life is seizing a compelling opportunity
to expand the scale of its UK business by acquiring a highly
complementary and sizable block of business,” said Sun Life CEO
Donald A Stewart.
“Importantly, the transaction demonstrates our
financial strength even during these turbulent times,” he
added.
For Lincoln Financial, the 10th-largest life
insurer in the US, the deal represents another step in its quest to
bolster liquidity and capital resources, hammered by net losses of
$506 million and $579 million in the fourth quarter of 2008 and
first quarter of 2009, respectively.
Further capital boosting moves by Lincoln
Financial include acceptance of a preliminary offer of $2.5 billion
under the Treasury’s Troubled Asset Relief Program and an exercise
aimed at raising $600 million in an underwritten public offering of
ordinary shares and $500 million by way of a senior debt issue.
COMPANIES
The Hartford in search of a new
leader
Still nursing the most damaging
financial setback in its 200-year history, US insurer The Hartford
is on the hunt for a new leader following the announcement that its
chairman and CEO Ramani Ayer will retire at the end of 2009.
Significantly, Hartford is looking externally
for Ayer’s replacement.
Aged 62, Ayer is a Hartford man, having joined
the insurer in 1973 following his graduation with a PhD in chemical
engineering from Drexel University.
During his 36 years with the company, Ayer
held numerous senior positions including that of president and
chief operating officer of Hartford’s principal general insurance
subsidiary from 1990 to early1997.
Ayer was appointed to his present position in
February 1997.
According to business publication Forbes,
Ayer’s total compensation in 2008 was $4.47 million, while the
value of exercisable share options held by Ayer in early June 2009
stood at just over $61 million.
COMPANIES
Fortis gets another
CEO
Fortis has appointed Bart De Smet as
its new CEO, the fifth person to have held this position with the
Belgian-Dutch insurer since July 2008.
De Smet, 51, replaced Karel De Boeck, CEO
since December 2008. Prior to de Boeck, the position of CEO during
2008 had been held by Filip Dierckx, Herman Verwilst and Jean-Paul
Votron.
De Smet joined Fortis in 1998 and at the time
of his appointment as CEO headed Fortis’ largest unit Fortis
Insurance Belgium (FIB) which with premium income of €6.3 billion
($8.9 billion) is responsible for 54 percent of group inflows. FIB
was renamed AG Insurance in June.
INDUSTRY TRENDS
US individual life sales
nosedive in first quarter
US individual life insurance came
under severe pressure in the first quarter of 2009, with new
annualised premium income plummeting 26 percent compared with the
same quarter in 2008, reports research and consulting organisation
LIMRA International.
“Historically, recessions had little effect on
individual life insurance sales,” said LIMRA president and CEO
Robert Kerzner.
“However, it appears the severity of this
current economic downturn has impacted sales dramatically,” he
added.
To put the first quarter performance into
perspective, Kerzner stressed the last time quarterly sales dropped
as much was in 1943.
While the impact of a demand slump was evident
across all product lines, variable products were worst hit with
premiums down a massive 61 percent.
Universal life (UL) products were also
punished with sales down a third. This was in sharp contrast to the
situation at the start of 2008 when UL was the only individual life
products reflecting solid growth.
Faring best were term life products which saw
sales fall by only 4 percent in the first quarter of 2009.
“Term products are affordable, likely making
them easier to sell right now,” commented LIMRA.
REGULATION
Florida regulator formalises
ties with German counterpart
A move towards closer international
ties between regulators has been highlighted by the forging of a
cooperative agreement between one of the more proactive US state
insurance regulators, The Florida Office of Insurance Regulation
(FOIR), and its German counterpart the Bundesanstalt für
Finanzdienstleistungsaufsicht (BaFin).
According to FOIR, the agreement will give
each regulatory agency formal authority to request assistance of
the other for verification, investigation and examination of issues
related to regulated companies under one or the other’s
jurisdiction.
“Florida’s insurance risk is underwritten in
an increasingly global marketplace,” said insurance commissioner
Kevin McCarty.
“Working closely with the BaFin will give us
an additional level of coordination and communication for the
resolution of issues that could affect insurance consumers in our
state.”
DISTRIBUTION
Generali broadens its direct
reach in Italy
Generali Group has bolstered its
distribution capabilities in Italy with the launch of Genertellife,
a direct marketing life and pensions operation functioning in
tandem with its general insurance internet and telephone marketing
unit Genertel, now in its 15th year.
To create Genertellife, Generali has rebranded
La Venezia Assicurazioni, a product factory for indirect channels
with 300,000 clients and more than €7 billion ($9.8 billion) in
assets under management.
In total, this will give the new
Genertel-Genertellife combination a base of 750,000 clients and
annual premium income of €2.4 billion.
“By replicating the success already achieved
in direct non-life business, we aim to establish the Generali Group
as a leader in the direct life channel and build, in the mid term,
our client base over and beyond the 1 million policyholder
threshold,” said Generali Group CEO Giovanni Perissinotto.
Genertellife will target what Generali termed
technology-literate clients in the under-40 age group, who are
under-insured and currently not covered by traditional
channels.
As a launch product, Genertellife is offering
Pensionline, a personal pension plan with monthly premiums starting
at €50.
BANCASSURANCE
Barclays and CNP target
southern Europe
French insurer CNP Assurances (CNP)
and UK bank Barclays Bank have joined forces to develop a southern
European bancassurance joint venture (JV).
As a key element of the JV, CNP will acquire a
50 percent stake in Barclays Vida y Pensiones (BVP), Barclays’ life
insurance captive unit that operates in Spain and Portugal for an
initial cash payment of €140 million ($200 million). CNP will
assume management control of BVP.
CNP noted that the deal is subject to a
post-completion adjustment which could potentially lead to a
substantial amount becoming payable to Barclays over a 12-year
period, dependent upon the JV achieving certain volume and margin
thresholds and Barclays branch openings.
As part of the deal, the partners have entered
into an exclusive distribution agreement for life and pension
products through Barclays’ 1,000 branches in Spain, Portugal and
Italy where BVP is to launch a new life insurance operation.
BVP achieved gross written premium income of
€251 million in 2008 and a net profit of €28 million.
COMPANIES
ING aims to slash costs in home
market
Advancing its ‘Back to Basics’
strategy, Dutch bancassurer ING is to rationalise insurance
operations in its home market.
Key element of rationalisation will be
consolidation of the existing three units – Nationale-Nederlanden,
RVS and ING Verzekeren Retail (formerly Postbank Verzekeren) –
under the Nationale-Nederlanden brand, with dedicated business
units for retail customers, small and medium-sized companies and
corporate clients.
ING has committed €165 million ($230 million)
over four years to fund the rationalisation which it anticipates
will begin yielding pretax cost savings that will already be seen
in 2010 and increase to €100 million annually by 2013.
As part of the rationalisation, ING
anticipates staff numbers will be reduced by 800 over the next
three years.
INDUSTRY TRENDS
Hong Kong first-quarter new
business slumps
Hong Kong’s life insurers were under
pressure during the first quarter of 2009, reports the Office of
the Commissioner of Insurance.
New business premium income,
excluding retirement business, slumped 60.5 percent to HK$8.54
billion ($1.1 billion) compared with the first quarter of 2008. The
decline followed a 24.9 percent decline in new business in 2008 to
HK$60.64 billion.
Responsible for most damage in the first
quarter of 2009 were sales of unit-linked individual life and
annuity products which recorded a HK$11.1 billion fall (83.5
percent) in sales to HK$2.2 billion.
Non-linked individual life and annuity
products sales also came under pressure, falling by almost $HK2
billion (24.2 percent) to HK$6.2 billion.
MERGERS AND ACQUISITIONS
UK specialist life insurer set
to change ownership
Ownership of UK life insurer Just
Retirement could soon change hands following an announcement by
Avalon Acquisitions – a company formed by funds advised by UK
private equity firm Permira Advisers – that it is considering
making an offer for the annuity and equity release specialist.
Avalon has already made firm progress towards
acquisition of Just Retirement, having secured an irrevocable
undertaking from private equity firm Langholm Capital in respect of
52.29 percent of the UK-listed insurer’s existing issued share
capital.
Langholm Capital’s undertaking is subject to a
minimum offer of £0.76 per share which values Just Retirement at
£225 million ($365 million). The undertaking is valid until 27
August 2009.
Established in August 2004, Just Retirement
reported annuity policy sales of £272.1 million in the six months
to December 2008 and equity release mortgage advances of £81.8
million.
Total assets under management stood at £1.7
billion and embedded value at £131.6 million.
DISTRIBUTION
ING and Eureko join for Greek
health push
In a display of mutually beneficial
cooperation, two Dutch insurers, ING Group and Eureko, have entered
into a five-year joint distribution agreement under which ING
Greece will distribute individual and group health insurance
products provided by Eureko’s Greek subsidiary, Interamerican, on a
preferred provider basis.
From Eureko’s perspective, the insurer noted
the agreement would provide Interamerican with a wider distribution
network for health insurance products, one of its core business
areas.
In 2008, Interamerican reported that life
insurance contributed €289.3 million in premium income and general
insurance €167.4 million. This gave Interamerican an 11.6 percent
share of Greece’s life market and 6.2 percent share of the general
insurance market.
DEVELOPING MARKETS
HSBC gets go ahead for China
joint venture
Ending a process that began in
September 2007, the China Insurance Regulatory Commission has given
the go ahead for UK bank HSBC’s Insurance (Asia) unit and
Beijing-based National Trust to launch a life insurance
business.
The new company, HSBC Life Insurance Company
Limited, in which HSBC and National Trust will be equal partners,
has initial capital of CNY500 million ($73 million) and will begin
operating in the third quarter of 2009.
According to HSBC the new venture will offer
life, pensions and medical insurance and for distribution will
employ an agency sales force and bancassurance partnerships.
HSBC has a solid presence in China’s banking
sector where it is represented by HSBC China, five rural banks and
stakes of 19 percent in Bank of Communications and 8 percent in
Bank of Shanghai. HSBC also has as 16.78 percent stake in Ping An,
China’s second largest life insurer
National Trust’s activities include asset
management, investment banking and wealth management.
BANCASSURANCE
Shenzhen Development Bank stake
for Ping An
Ping An Life, China’s second-largest
life insurer, is set to become a strategic investor in Shenzhen
Development Bank (SDB) following an agreement reached with the
bank’s largest shareholder – Singapore-based private equity firm
Newbridge Capital.
Under the terms of the deal Ping An will
undertake the investment in two phases, in the first of which it
will subscribe for up to 585 million new SDB shares for a cash
consideration of up to CNY10.68 billion ($1.56 billion).
In the second phase Ping An will purchase, by
way of cash or an issue of its own shares, 520.4 million of SDB’s
shares from Newbridge before the end of 2010.
If executed in cash the consideration for this
purchase is estimated by Ping An at CNY11.45 billion.
Ping An has said that its stake in SDB will
not exceed 30 percent. If the deal with Newbridge is undertaken by
way of a share issue Newbridge will acquire a 4.1 percent stake in
Ping An.
Established in 1987, SDB operates 286 branches
and sub-branches in 19 major cities throughout China. The bank
reported total assets of CNY521.9 billion as at 31 March 2009.
REGULATION
FSA aims to wield an even bigger
stick
UK financial institutions and
individuals involved in the financial services industry that fall
foul of the Financial Services Authority’s (FSA) regulations are
set to face significantly stiffer financial penalties under a new
disciplinary framework just published.
The FSA said it plans to change the behaviour
of companies that are repeatedly failing to improve standards in
relation to, for example, mis-selling to consumers and market
misconduct.
Under the FSA’s proposals, fines could in some
instances treble in size and will be linked more closely to income
and be based on:
• Up to 20 percent of the company’s income
from the product or business area linked to the breach over the
relevant period;
• Up to 40 percent of an individual’s salary
and benefits (including bonuses) from their job relating to the
breach in non-market abuse cases; and
• A minimum starting point of £100,000
($160,000) for individuals in market abuse cases.
The FSA has opened its proposals for
consultation until 21 October 2009. Any new policy adopted is
likely to apply to breaches committed after February 2010.
INDUSTRY TRENDS
Emerging markets ho ld their
own in 2008
Total premium income earned by the
world’s life insurance industry fell 3.5 percent in 2008 to $2.49
trillion, reveals data published by Swiss Re in its latest annual
World Insurance Review.
Premium income in industrialised countries led
the decline, falling by 5.3 percent compared with 2007 to $2.2
trillion, with the biggest damage done by declines in unit-linked
and products equity market-linked products.
On a positive note and justifying attention
given by many insurers to expansion in developing regions, life
premium income in non-industrialised fared far better in 2008,
increasing by a healthy 14.6 percent to a total of $271
billion.
Daniel Staib, one of the review’s authors,
said: “Since many emerging market countries profited from a sharp
increase in commodity prices during the first half of last year,
their economies continued to perform well, even as the decline in
industrialised countries set in from September.”
Hit by the financial crisis the average
shareholder capital in the global life insurance industry shrank by
30 percent to 40 percent on average in 2008, noted Swiss Re.
PENSIONS
UK defined benefit deficit hits
new record in June
A huge problem facing the UK’s 100
largest listed companies – their defined benefit (DB) pension
scheme deficits – deteriorated further in June, indicates data from
DB consultancy Pension Capital Strategies (PCS).
According to PCS, the combined DB scheme
deficits of the companies ended June at a record £90 billion ($150
billion), up from £50 billion two months earlier and £8 billion at
the end of June 2008.
Given the huge problem Charles Cowling, MD of
PCS, criticised The Pensions Regulator for calling on DB scheme
trustees to adopt more conservative assumptions used to calculate
pension scheme deficits that will show even larger deficits.
“It is not surprising that companies are
reacting to this combination of tough economic conditions and an
increasingly unfriendly Regulator by closing down final salary
pension schemes,” said Cowling. “We believe that within the next
two to three years the very large majority of final salary pension
schemes in the private sector will be closed to all employees.”
REGULATION
Florida takes aim at Liberty National
Life
One of the US’ toughest insurance
regulators, Florida insurance commissioner Kevin McCarty, has
turned his attention on Liberty National Life (LNL), threatening
the insurer with suspension or revocation of its licence to operate
in the state.
At issue is an allegation that, based on
national origin or potential travel plans, LNL discriminated
against certain consumers wanting to buy life cover.
According to McCarty, in an on-site
investigation at LNL’s head office investigators reviewed over
7,000 life insurance application files and found 1,149 violations,
of which 1,053 were for discriminatory practices.
The investigation by McCarty’s Office
reviewed, among other things, LNL’s underwriting practices,
agent-training materials, forms and new-business issue process.
Based on the number of policies issued in 2007
by LNL – 242,010 – it ranks as the US’ sixth-largest life
insurer.
ANNUITIES
UK consumers want growth and
guarantees
Interest among UK consumers in
variable annuities (VA) offering income guarantees is on the
increase, according to Aegon, one of the pioneers of the country’s
relatively new VA market.
Aegon bases its conclusion on a consumer
survey conducted on its behalf to gauge attitudes of people over
the age of 45 towards guarantees and alternative retirement
solutions.
The survey, conducted during May and June,
revealed that 90 percent of respondents value guarantees on their
retirement income.
Also , compared to traditional annuities,
bonds and income drawdown, 58.8 percent are most likely to choose a
retirement product that provides a minimum guaranteed level of
income for life and offers the potential for that income to
increase over time.
The survey also revealed that, in the context
of the current uncertain financial climate, 35 percent of
respondents would now be more likely to consider a VA type product
to secure a guaranteed minimum lifetime income.
