COMPANIES
Nippon Life makes $500m investment in Prudential
Financial
Go deeper with GlobalData
Continuing to expand its presence in the US insurance industry,
Japan’s largest insurer Nippon Life has purchased a $500 million
10-year exchangeable surplus note issued by The Prudential
Insurance Company of America, a unit of Prudential Financial. Under
the terms of the transaction, Nippon Life can exchange the surplus
note for Prudential Financial ordinary shares at any time, at
Nippon Life’s option, beginning on the fifth anniversary of
issuance of the note.
Already holding 2.56 million shares in Prudential Financial, Nippon
Life has a stake of almost 0.6 percent in Prudential Financial
worth some $130 million at the US insurer’s current share
price.
In the US, Nippon Life also holds a 7 percent stake in financial
conglomerate Principal Financial Group and a 5 percent stake in
Russell Investments, a unit of insurer Northwestern Mutual, which
has assets under management of about $150 billion. In addition,
Nippon Life operates directly in the US via health insurance unit,
Nippon Life Benefits.
The world’s largest mutual insurer, Nippon Life reported total
revenues of ¥6.6 trillion ($67 billion) in 2008 and total assets of
¥46 trillion at the end of that year.
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By GlobalData
OUTSOURCING
CSC in line for huge outsourcing deal
Computer Science Corporation (CSC) is set to land another major
insurance business processing outsourcing (BPO) deal following
Swiss insurer Zurich Financial Services Group’s decision to enter
into exclusive contract negotiations with US technology services
company.
At stake is a contract for the provision of data centre and
information technology infrastructure managed services for Zurich’s
operations in Europe and North America, data centre centralisation
and server virtualisation. If awarded the contract would be worth a
total of $2.4 billion over 10 years.
The contract negotiation period is for six months, with CSC noting
that services are expected to commence under a master service
agreement and one or more country specific agreements in the first
half of 2010.
Research firm Celent recently named CSC as a leader in the North
American life, pensions and annuities BPO market based on data
collected on 278 BPO contracts representing an estimated $1.4
billion in annual revenue. The total North American life, pensions
and annuities BPO market is worth some $1.9 billion annually,
according to Celent.
COMPANIES
Delta Lloyd’s listing confirmed by Aviva
In a follow up to a statement issued in August UK insurer Aviva has
announced that it is to sell a minority portion of its stake in
Delta Lloyd Group (DLG) as part of initial public offer (IPO) by
the Dutch composite insurer on the Euronext Amsterdam stock
exchange.
According to the statement, for Aviva, an IPO would bring
flexibility to pursue balance sheet restructuring opportunities or
to explore other opportunities for growth. Aviva would also benefit
from the enhanced value and liquidity of the retained stake.
The statement continued that DLG would benefit from a new
shareholder base supportive of the company’s growth ambitions in
the Benelux region.
A public listing would help DLG to better position itself ahead of
anticipated consolidation in the Netherlands and Belgium. DLG’s IPO
is anticipated to be completed in November.
In the first half of 2009 DLG increased net profit 50 percent
compared with the first half of 2008 to €151 million ($220 million)
while shareholders’ equity increased by 21 percent from €3.3
billion at year-end 2008 to €4 billion. DLG’s gross premium income
fell 21 percent in the first half of 2009 to €2.8 billion with life
premium income doing the most damage, falling 29 percent to €1.9
billion.
COMPANIES
Generali consolidates Spanish operations
Generali Group’s board has approved the merger of its two Spanish
units, life insurer Vitalicio Seguros and general insurer Estrella
Seguros, to form a new composite insurer Generali España SA de
Seguros y Reaseguros. Spain is the Italian insurer’s fourth-largest
market.
Commenting on the merger, Generali Group’s CEO Sergio Balbinot
highlighted that it completed a comprehensive restructuring program
involving the insurer’s operations in Germany, France and Italy
over the last few years.
The new company created through the merger has more than 3.2
million clients and an overall market share of 4.7 percent. In 2008
Generali reported gross life insurance premium income in Spain of
€1.2 billion ($1.8 billion) and gross general insurance premium
income of €1.6 billion.
This represented 2.6 percent of the group’s total gross life
premium income of €46.8 billion in 2008 and 7.1 percent of its
total gross general insurance premium income of €22 billion.
Operations under the new Generali España business name are due to
commence at the end of the first half of 2010.
DEVELOPING MARKETS
Standard Life scales back interests in China
Chinese regulators are in the final stages of approving a deal that
will see UK insurer Standard Life reduce its stake in its Chinese
joint venture (JV) Heng An Standard Life (HASL). If approved,
Standard Life and its JV partner Teda International will sell
undisclosed portions of their stakes in HASL to Bank of China (BoC)
which will become the majority shareholder.
HASL was launched in December 2003 with an initial capital of some
£100 million ($160 million) contributed equally by Standard Life
and Teda International, a financial asset investment holding
company of the government of China’s Tianjin Province.
Headquartered in the city of Tianjin, HASL has a staff of some
5,500 and operates in nine provinces via 42 distribution
offices.
China’s third-largest commercial bank, state-owned BoC, is no
stranger to the insurance market having established Hong Kong-based
Bank of China Group Insurance Company (BCGI) in 1992. Primarily
active in the mainland China and Hong Kong general insurance
markets, BCGI also offers life insurance in Hong Kong via a 49
percent-owned associate company, BOC Group Life Assurance.
REGULATION
US insurer founders
California’s insurance commissioner Steve Poizner has blown the
whistle on cash-strapped Golden State Mutual Life (GMSL), serving
it with an Order of Conservation that empowers him to liquidate the
84-year old mutual insurer or attempt to resuscitate it.
Indicative of its problems, GSML reported capital and surplus of
$1.65 million as at 30 June 2009 compared with a minimum
requirement of $5 million. According to Poizner, GSML will report a
third quarter 2009 loss of some $600,000, building on cumulative
losses of $6.1 million over the past five years.
In 2008 GSML reported total premium income of $11.6 million earned
in its home-state, California and 11 other states.
DEVELOPING MARKETS
Manulife affirms its commitment to China
Responding to reports in China’s media that some foreign insurers
may be planning to scale back operations in the country Canada’s
largest insurer Manulife Financial has issued a statement affirming
its commitment to continue aggressively expanding its local venture
Manulife-Sinochem Life Insurance.
A source of confusion was the recent granting by Chinese regulators
to Manulife of permission to sell its 50 percent stake in John
Hancock Tianan Life Insurance (JHTL), an asset Manulife acquired
when it merged with US-based John Hancock in 2004. “The completion
of this non-material transaction achieves Manulife’s long-held
intention to focus on its original partnership with
Manulife-Sinochem,” noted Manulife.
Manulife-Sinochem, a joint venture (JV) with state-owned Chinese
chemical giant Sinochem Corporation, was the first Sino-foreign
insurance company approved by the China Insurance Regulatory
Commission (CIRC) and launched operations in November 2002.
Underscoring its commitment to the JV Manulife announced that the
CIRC has granted Manulife-Sinochem approval to operate in the
Province of Tianjin, one of China’s fastest growing provinces. The
license expands Manulife-Sinochem’s presence in China to 37 cities
in11 provinces.
Manulife-Sinochem employs 11,500 staff and agents serving over
450,000 customers.
ACTUARIAL
New code of conduct for UK’s Actuarial
Profession
The Actuarial Profession, a body governed jointly by the Faculty of
Actuaries in Edinburgh and the Institute of Actuaries in London,
has launched a new code of conduct for its members which replaces
the previous, far more complex set of standards.
The new code sets out five key principles which members must adhere
to:
• Integrity – acting honestly and with the highest standards of
integrity;
• Competence and care – performing professional duties competently
and with care;
• Impartiality – not allowing bias, conflict of interest or the
undue influence of others to override professional judgement;
• Compliance – with all relevant legal, regulatory and professional
requirements; taking reasonable steps to avoid being placed in a
situation of non-compliance; and challenging non-compliance by
others;
• Open communication – communicating effectively and meeting all
applicable reporting standards.
Commenting, Nigel Masters, president of the Institute of Actuaries,
said: “This code is an important element of how we interact with
the wider world. At a time when the public demand ever stronger
guarantees of trust with the financial world, our new code offers
just that.”
The Actuarial Profession’s total membership reached 20,000 on 10
February 2009.
MARKETING
Renault booted by ING
In a curt statement ING Group has announced the immediate
termination of its sponsorship contract with Renault. ING’s
decision followed close on the heels of news that Renault’s Formula
One (F1) team had been handed down a two year suspended ban by the
World Motor Sport Council for its role in the fixing of the 2008
Singapore Grand Prix.
“ING is deeply disappointed at this turn of events, especially in
the context of an otherwise successful sponsorship,” the Dutch
bancassurer commented in its statement.
ING had announced on 16 February this year that it would not to
renew the three year sponsorship contract with Renault F1 and to
end its presence in Formula 1 after the end of the 2009
season.
With ING out of F1 Allianz remains the only insurer involved in the
sport. Allianz announced earlier this year that it would extend its
sponsorship contract with the AT&T Williams F1 team until the
end of 2010.
At the time of the announcement Steven Althaus, Allianz senior
vice-president global market management described F1 as a “perfect
platform to reach millions of people worldwide every race
weekend.”
ASSET MANAGEMENT
Prudential Financial to exit Korean asset management
market
Prudential Financial may soon be bidding farewell to Korea’s asset
management market if options currently being explored prove
fruitful.
Announcing this possible development the US insurer said its
options include the sale of either or both of Prudential
Investments & Securities Company and Prudential Asset
Management Company, both of which are headquartered in Seoul.
Prudential Financial entered Korea’s asset management market in
2004 with the acquisition of an 80 percent stake in Hyundai
Investment and Securities, the country’s third-largest asset
management firm, from the Korean government for $300 million.
Prudential stressed that its possible exit of the country’s asset
market does not affect its life insurance business in Korea, The
Prudential Life Insurance Company of Korea, also known as
Prudential of Korea, which it established in 1990.
DEVELOPING MARKETS
Property door opens for China’s insurers
China’s New Insurance Law came into force on 1 October bringing
amongst many changes the opportunity for insurers to invest
directly in commercial property for the first time. This
development believes US property services company Jones Lang
LaSalle (JLL) heralds a major step that could see insurers pour
billions of dollars into the sector.
Although only an optimistic estimate at this stage, JLL believes
that Chinese insurers could potentially invest of the order of $35
billion in the domestic property sector. This would require the
China Insurance Regulatory Commission to permit some15 percent of
the insurance industry’s total investment assets to be channelled
into property.
Assessing potential developments in China’s property investment
market over the next few years JLL anticipates that significant
changes will be seen. These include:
• A shift in market leadership from overseas to domestic players,
including insurers;
• An increasingly competitive investment market where international
capital will need to aggressively innovate and prove its worth to
compete with increasingly active local players; and
• Enhanced transaction volumes and transparency that will likely
result in lower investment yields.
DEVELOPING MARKETS
Swiss Re goes cold on health insurance JV
A mooted new joint venture (JV) company in India’s health insurance
market has come to naught following Swiss Re’s decision not to
pursue discussions with Indian diversified financial services group
Religare Enterprises. The two companies signed a non-binding term
sheet to develop the JV health insurer on 1 June 2009.
A Swiss Re spokesman commented that the reinsurer remains committed
to offering its actuarial and underwriting expertise in the Indian
market, and “continues to be open to exploring a health insurance
joint venture.”
Expressing a similar sentiment a Religare spokesman commented:
“Religare on its part wishes to go ahead aggressively in the health
insurance sector, keeping its broader goals in mind. Committed to
offer its services in the health insurance sector, the company is
open to considering new potential partners.”
Religare’s major foreign partner in India is Dutch insurer Aegon,
its JV partner in Aegon Religare Life Insurance which was launched
in August 2008.
