ING sells Canadian general insurer …
Shenandoah Life falls prey to financial
crisis..
Serious Fraud Office launches AIG probe…
Lincoln Financial wins tussle with Aegon..
COMPANIES
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ING sells Canadian general insurer
In a deal that will net it C$2.163
billion ($1.72 billion), Dutch bancassurer ING has sold its 70
percent stake in ING Canada. The sale is in two parts, one of 60
percent to an unnamed group of institutional investors and the
balance to a syndicate who were to underwrite a public placement of
the remaining 10 percent stake.
ING chairman and CEO-designate Jan Hommen
said: “As we announced on 26 January, we will increase our focus on
businesses and regions where we have a strong and sustainable
position in savings and investments.”
Hommen added that proceeds from the
transaction will be used to strengthen ING’s capital position.
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By GlobalDataING Canada, Canada’s largest vehicle, business
and home insurer, generated C$620 million in cash in 2008 and ended
the year with C$427.5 million and no debt. Following closure of the
deal, ING Canada is to be rebranded as Intact Insurance
Company.
REGULATION
Shenandoah Life falls prey to
financial crisis
The financial crisis has claimed
another victim, this time US mutual insurer Shenandoah Life
Insurance Company which has been placed into receivership by the
Virginia Commissioner of Insurance (VIG).
According to the VIG, Shenandoah
Life’s financial problems were sparked by a $50 million loss on
investments in home mortgage lenders Fannie Mae and Freddie
Mac.
The decision to place Shenandoah Life into
receivership followed an announcement Indiana-based insurance
conglomerate OneAmerica that it would not proceed with its mooted
acquisition of Shenandoah Life.
Shenandoah Life was founded in 1914 and is
licensed to do business in 31 states plus the District of Columbia.
The failed insurer joins two Indiana insurers, Standard Life
Insurance Company of Indiana and Indiana Medical Savings Insurance
Company, which were placed into receivership in December 2008.
REGULATION
Serious Fraud Office launches
AIG probe
Already the subject of probes by US
authorities and the UK’s Financial Services Authority, American
International Group’s Financial Products (AIGFP) unit is to be
investigated by the UK’s Serious Fraud Office (SFO).
“It is right for us to look into the UK
operations of AIG Financial Products to determine if there has been
criminal conduct,” said SFO director Richard Alderman in a
statement.
“We will use our full range of powers to seek
information and to speak to those with an inside knowledge of the
company’s operations,” he added.
In a statement responding to the SFO’s
announcement, AIG promised its full cooperation and noted that some
370 employees in AIGFP worldwide are working on the winding down of
the business.
A major factor in AIG’s financial devastation,
AIGFP recorded pre-tax losses of $11.5 billion in 2008 and $22.3
billion in the first three quarters 2008.
LEGAL
Lincoln Financial wins tussle
with Aegon
US insurer Lincoln Financial Group
(LFG) has scored a victory in a legal battle with three units of
Aegon USA, the US operation of Dutch insurer Aegon.
At issue was an alleged infringement by
Transamerica of a patent held by LFG relating to a computerised
method for administering variable annuity (VA) products that
combine guaranteed minimum payment features with systematic
withdrawal programmes.
In addition, the patent includes data
processing methods used to administer VAs in the payout phase and
withdrawals from mutual funds, particularly systematic withdrawals
from funds.
In its verdict, the jury found that Lincoln’s
patent was valid and determined that a reasonable royalty for its
infringement was $13.1 million. The Aegon USA units involved were
Transamerica Life Insurance, Transamerica Financial Life Insurance
and Western Reserve Life Assurance.
BANCASSURANCE
UK bancassurance boost for
Axa
Implementation of an alliance
agreement between French insurer Axa’s UK unit Axa Life and Glasgow
Scotland headquartered Clydesdale and Yorkshire Banks (CYB)
announced in November 2008 has been completed.
Under the agreement CYB, a
subsidiary of National Australia Bank (NAB), has transferred £1.2
billion ($1.75 billion) of funds under management by NAB’s wealth
management division MLC to Axa’s Architas multi-manager unit and
129 branch-based financial planners to Axa.
The exclusive alliance gives Axa Life access
to CYB’s 2.3 million retail banking customers which are served by
the bank’s network of 342 branches which are located primarily in
Scotland and the north of England.
CYB has, however, retained a separate team of
senior financial planners, who have moved from a multi-tie
arrangement to a whole of market approach.
COMPANIES
Eureko gets e1bn capital
injection
With its balance sheet hammered by a
€2.1 billion ($2.7 billion) net loss in 2008, Dutch composite
insurer Eureko has turned to its major shareholders, Dutch
financial services cooperative Achmea Association and Dutch bank
Rabobank Group, for a much-needed €1 billion capital injection.
Of the total new ordinary capital, Achmea will
contribute €600 million and Rabobank €400 million, partially
offsetting the €2.9 billion decline to €7.5 billion in Eureko’s
capital position in 2008.
Achmea and Rabobank have stakes of 54.4
percent and 39.5 percent, respectively, in Eureko.
Based on unaudited figures, the equity market
collapse did major damage to Eureko’s results with the insurer
reporting a €1.054 billion impairment to its equity portfolio,
partially offset by a €251 million hedging gain. Realised losses on
equity and fixed income investments totalled €429 million and €71
million, respectively.
Other significant damage to Eureko’s results
was done by impairments totalling €796 million to investments in
associated companies, a €462 million fair-value adjustment to its
annuity portfolio and €136 million to make good minimum guaranteed
returns on segregated investment accounts.
Euroko’s unaudited results release came five
days after the announcement that Willem van Duin will succeed
Maarten Dijkshoorn as CEO.
Dijkshoorn stepped down on 2 January.
COMPANIES
Taiwanese deal gives Prudential
a big capital boost
For a nominal amount of TWD1
($0.03), Taiwanese insurer China Life Insurance Company of Taiwan
(CLI) is to the assets and liabilities of UK insurer Prudential’s
agency distribution business and agency force in Taiwan.
Based on international financial
reporting standards (IFRS) the business being transferred had gross
assets of £4.5 billion ($65 billion) at the end of 2008 and
represents 94 percent of Prudential’s in-force liabilities in
Taiwan.
Despite the negligible price the sale is
“enormously value-enhancing for Prudential Group on several
levels,” said Prudential group chief executive Mark Tucker.
Specifically, after a one-off IFRS negative
impact of £595 million including restructuring costs, Prudential’s
economic capital as defined by the European Union Insurance Group
Directive increase by £800 million and its embedded value under
European Embedded Value principles will increase by £90
million.
The transaction with CLI, Taiwan’s
fourth-largest life insurer, does not spell Prudential’s exit from
Taiwan.
Under the agreement, Prudential will invest
£45 million to purchase a 9.95 percent stake in CLI through a share
placement and will, in addition, continue to pursue its
bancassurance relationships with Taiwanese financial services group
E-Sun and UK bank Standard & Chartered’s Taiwan unit.
Prudential is also active in asset management
in Taiwan via its PCA Securities Investment Trust unit.
INDUSTRY TRENDS
Axa UK ups protection age
limit
French insurer Axa’s UK unit has
raised the age limit on life cover from 70 to 85 in response to
increased longevity which has delayed what it terms “some of the
key milestones in life”.
For example, Axa noted that women over the age
of 35 have the fastest-growing birth rate in the UK, while the
average first-time home-buyer’s age has risen to 34.
People of retirement age are also staying in
work for longer, added Axa.
In addition to increasing the age limit on
life cover, Axa announced that customers offered standard rates now
have 180 days from when the terms are offered in which to take up
the offer without completing a declaration of health, an increase
from 90 days previously.
Consumers offered rated premiums now have 90
days from when the terms are offered in which to take up the offer,
an increase from 30 days previously.
Axa’s move comes at a time of flagging
consumer demand for protection insurance. According to the
Association of British Insurers, new regular and single individual
protection premium income totalled £413 million ($580 million) in
the fourth quarter of 2008, down 14.7 percent compared with the
same quarter in 2007.
DEVELOPING MARKETS
Chinese insurers off to a
positive start
Shrugging off economic gloom China’s
insurance industry was a net buyer of shares worth CNY2.1 billion
($31 million) in January, according to China’s official news agency
Xinhua, quoting a statement from the China Insurance Regulatory
Commission (CIRC). The release was intended to dispel rumours of an
“industry sell-off” noted Xinhua.
CIRC data revealed, at the end of January the
insurance industry held 83.9 percent of its total investment assets
in bank deposits and bonds, 13.9 percent in equities and mutual
funds and the remaining 2.2 percent in other assets.
The CIRC also released figures showing that
the insurance industry’s total premium income stood at CNY114.8
billion in January, up 8.6 percent compared worth January 2007.
Results from China’s two largest life
insurers, China Life and Ping An which have a combined market share
of about 55 percent, also indicated continued growth in the life
sector.
Compared with January 2008 China Life reported
a 19 percent increase in premium income to CNY30.7 billion while
Ping An reported a 23 percent increase to CNY33.3 billion.
China’s third largest life insurer, China
Pacific Insurance, reported a 15 percent fall in premium income in
January to CNY7 billion.
COMPANIES
Changing of the guard as ING
revamps top management
In another revamp of its top
management structure, Dutch bancassurer ING has announced the
appointment of Patrick Flynn as its new chief financial officer
(CFO).
Flynn who is currently UK bank
HSBC’s CFO of global Insurance business, will replace John Hele who
is to take up the position of CFO at Bermuda-registered insurer
Arch Capital Group on 1 April.
Flynn, a chartered accounted, spent a total of
20 years with HSBC where he held a number of other senior positions
including that of senior manager of HSBC Group Finance between 1995
and 1998; head of international finance control between 1999 and
2002; and CFO for HSBC’s banking and insurance operations in South
America between 2002 and 2006.
The appointment of Flynn follows ING’s
announcement in January that its chairman Jan Hommen was to assume
the additional role of CEO from Michel Tilmant who stepped down on
26 January.
INVESTMENTS
Standard Life pays
up
Bowing to pressure from aggrieved
investors, UK insurer Standard Life has announced that it will make
immediate payments to customers impacted by a 4.8 percent fall in
the unit price of its Pension Sterling Fund (PSF) on 14
January.
“We have listened to feedback and the concerns
of our customers and key business partners and have decided to put
customers back in the position they would have been before the
valuation adjustment,” the insurer said in a statement.
Prior to the price adjustment, PSF had assets
totalling £2.1 billion ($3 billion) and some 97,000 investors.
Restoring investors to the position they were
in prior to the adjustment will, said Standard Life, result in a
pre-tax charge of £100 million against profits in its financial
year ended 31 December 2008. The after tax impact is estimated at
£72 million.
PSF will continue to investing in bank and
building society deposits and floating rate notes, the majority of
which are asset backed securities, noted Standard Life.
DEVELOPING MARKETS
Marsh makes solid progress in
China
In its review of China’s insurance
intermediary market, the China Insurance Regulatory Commission
(CIRC) has for the second year running ranked US broker Marsh’s
Marsh (Beijing) Insurance Brokers unit as the country’s top
international broker. The ranking was based on annual invoiced
revenue achieved in 2008.
On an overall basis Marsh ranked fourth in
China based on its invoiced revenue which increased by 43 percent
compared with 2007 to CNY134.03 million ($19.62 million). This
represented a 5.1 percent share of the market which recorded total
invoiced revenue of CNY2.65 billion, 31.3 percent compared with
2007.
Marsh, a unit of Marsh & McLennan
Companies, has been active in China since being granted the first
ever Wholly Owned Foreign Enterprise insurance broking license in
January 2007.
Based in Beijing, Marsh operates branches in
five cities and employs 180 people.
According to the CIRC there were 2,445
insurance agencies in China at the end of 2008.
