US group business
Analysts back global expansion by
Northwestern Mutual adds humour
RGA takes a mortality
US group business disappoints
US group term life (GTL) business made disappointing headway in
2007 with new sales remaining unchanged from the previous year’s
level at just under $2 billion, reveals a survey of the market’s 32
major carriers undertaken by reinsurer and consultancy JHA.
“Group life sales growth remains a challenge,” observed JHA
president Drew King.
GTL business in force, however, edged ahead, increasing by 3
percent to $18 billion while the number of employers offering Group
Term Life coverage rose 1 percent. The average face amount on a new
GTL policy in 2007 was just over $64,000.
A parallel survey by JHA of 27 major carriers in the group
disability insurance market reflected more buoyant conditions in
Long-term disability sales increased by 18 percent compared with
2006 to $1.56 billion while short term disability sales increased
by 10 percent to $670 million. In force long- and short-term
disability business grew by 5 percent to $12.8 billion.
Protective goes online
In a bid to speed up policy delivery US insurer Protective Life has
launched Electronic Policy Delivery (EFD), a service offering
customers the option of receiving policies and related documents
“This new capability raises the bar for timely, efficient customer
service, and lets the policy owner access their complete policy
whenever and wherever they like,” said Protective executive
vice-president and COO Carolyn Johnson.
To use the EPD service a customer provides Protective with an
e-mail address. Upon issue of the policy, Protective sends an
e-mail message with a link to a secure website, first to the agent
to review and release, then to the customer who can access the full
policy contract and related documents.
The client will review each document, provide electronic signatures
where needed and make their first premium payment online if
As at 31 December 2007 Protective had $474 billion of life
insurance business in force.
Analysts back global expansion by insurers
Expansion initiatives in emerging markets will be a key driver of
superior investment ratings for North American, Japanese and
European life insurers over the next three years, predicts
The consulting and technology service provider’s conclusion is
based on a survey of 28 life insurance analysts in 14 of the
world’s largest insurance markets.
Specifically identified as the prime target markets for expansion
were Brazil, Russia, India, China, Mexico and Korea with 82 percent
of analysts citing organic growth as the growth driver they would
“While opportunities for life insurers vary by geography and market
circumstances, our research suggests that analysts overall are
looking to reward carriers with bold visions for the longer-term
opportunities in emerging markets,” said Accenture Insurance
practice MD Serge Callet.
“The winners will be those who have flexible, scalable and
efficient operations and can strike the best partnerships and joint
ventures around the globe.”
In addition to global expansion, Callet added one of the “most
remarkable findings” was that a vast majority of analysts ranked
transformation programmes aimed at improving efficiency only
slightly behind share-buybacks and dividend increases among the
most important uses of capital and significantly ahead of product
and service innovations.
Northwestern Mutual adds humour to marketing
No doubt a sign of tough economic times, US life insurer
Northwestern Mutual has launched an online marketing campaign
designed to bring a little humour into customers’ lives.
The ‘Let Your Worries Go’ campaign enables visitors to a special
interactive website to select from what Northwestern Mutual terms
the most frequent societal worries selected by the public and
“dispose” of these either by way of a rocket ship, submarine,
medieval catapult or hot air balloon.
“We wanted a fun and engaging way to resonate with all of our
internet-savvy customers,” explained Northwestern director of brand
and advertising Nag Odekar.
“We believe the ‘Let Your Worries Go’ concept enables us to break
through the clutter – illustrating our company’s value [products] in an entertaining and meaningful way,” he added.
As part of its marketing campaign, Northwestern has committed to
donating a total of $1 million to four nonprofit organisations in
2008 to help alleviate hunger and illness, provide natural disaster
relief and improve health and fitness.
RGA takes a mortality knock
Worse than expected mortality experience in the first quarter of
2008 took its toll on specialist life reinsurer Reinsurance Group
of America (RGA), slicing its net profit to $31.5 million, 59
percent down compared with the first quarter of 2007.
The reversal followed 10 consecutive quarters of better than
expected mortality experience.
“The level of claims in both the US and UK, our two largest
mortality markets, was well above expectations,” said RGA president
and CEO A. Greig Woodring.
“The total claim count and the level of large claims in our
traditional mortality segment were higher than expected by
approximately $50 million, pretax,” he added.
However, he stressed that RGA is prone to periodic mortality
fluctuations and that higher than expected mortality experience was
not expected to continue.
“We view the results as random volatility that is an expected part
of our business,” stressed Woodring.
RGA reported total net premium income of $727.1 million in the
first quarter of 2008, up 8 percent compared with the first quarter
of 2007. As at 31 December 2007 RGA had $2.2 trillion of life
reinsurance in force, and assets of $21.8 billion.
RGA’s biggest shareholder is US insurer MetLife which holds a 52
MERGERS AND ACQUISITIONS
Zurich Financial expands in Spain
In a deal worth a minimum of $360 million Swiss composite insurer
Zurich Financial is to acquire a 50 percent stake in Spanish bank
Caixa d’Estalvis de Sabadell’s (Caixa Sabadell) life insurance
unit, CaixaSabadell Companyia d’Assegurances Generals (CSG), and
general insurance unit, CaixaSabadell Vida de Seguros y Reaseguros
Subject to the profit performance of CSG and CSV over an
unspecified period the total acquisition cost could rise to a
maximum of $510 million.
“The transaction represents a high potential growth opportunity for
us to expand in one of our key growth areas,” said Zurich CEO
(Global Life Insurance) Mario Greco.
The deal with Caixa Sabadell includes a bancassurance alliance that
will enable Zurich to gain access to the bank’s 620,000 customers
and network of 366 branches.
In 2007 Caixa Sabadell’s insurance distribution was dominated by
general insurance with CSV and CSG recording written premium income
of $363 million and $3 million, respectively.
L&G to enter ‘takaful’ market
UK insurer Legal & General and Bahrain-based retail and
investment bank Ahli United Bank (AUB) have signed a memorandum of
understanding to establish a new 50:50 joint venture company
focused on providing takaful (Islamic Sharia-law compliant) life
and health insurance products and pension plans to customers in the
The joint venture company, which will be headquartered in Bahrain
and regulated by the Central Bank of Bahrain, will have an
authorised capital of $200 million of which $25 million will be
initially issued and paid up.
In addition to Bahrain, AUB has wholly owned and significant
shareholdings in banks in Kuwait, Qatar, Iraq, Egypt and the UK and
a total of 78 branches.
UK retirement product market set to boom
Sales of financial products designed to convert invested assets,
such as those built up within personal pension plans, into income
are set to boom in the UK predicts consultancy Watson Wyatt.
The products Watson Wyatt terms at-retirement products include
conventional annuities, variable annuities and income
According to Watson Wyatt the UK’s at retirement product market was
worth £13.6 billion ($26.8 billion) in 2007 and will more than
double to £30 billion within five years.
“The rapid growth in this market provides considerable
opportunities for product providers and financial advisers alike,”
said Watson Wyatt senior consultant Mark Joannes.
“The phenomenal growth we can expect in the at retirement market in
the next few years is in part a consequence of the personal
pensions sales boom back in the late 1980s and early 1990s,”
“A lot of those people who took out personal pensions back then are
now coming up to retirement age. With the prospect of a
long-retirement ahead of them, many will be looking for ways to
maximise retirement income while minimising capital erosion.”
ING Australia offers birth defects cover
The Australian unit of Netherlands bancassurer ING has launched a
first of its kind rider in Australia: insurance for unborn babies
as an option on its OneCare policy.
ING Australia said the addition of the rider, which is available to
women aged between 16 and 40, was in response to risks associated
with the rising age of pregnancy.
According to ING the median age of Australian mothers has
risen from 27 in 1985 to 31, bringing with it increasing risk of
pregnancy complications and birth defects. For example:
• The incidence of pregnancy complications rises from 10
percent for women aged between 20 and 29, to 19 percent for women
aged between 35 and 39.
• A woman aged 40 has a 1 in 60 chance of having a baby with
Down’s syndrome, compared with a 1 in 1,500 chance at age 25.
• The incidence of stillbirth is 1 in 440 pregnancies for
women aged 35 or more, compared with 1 in 1,000 for younger
Maximum lump sum cover available is A$50,000 ($47,000) for
pregnancy complications or if a child is born with a congenital
abnormality an A$10,000 if a foetus or new born baby dies. Cost of
cover averages A$30 per month.
MERGERS AND ACQUISITIONS
Allianz consolidates position in Turkey
Reflecting continued and growing interest by foreign insurers in
Turkey, Allianz has reached an agreement with its Turkish partner
Koç Holding to acquire controlling stakes in life insurer Allianz
Hayat ve Emeklilik (AHE) and general insurer Koç Allianz Sigorta
The European insurer will pay Koç Holding, Turkey’s largest
conglomerate, €125.2 million ($195 million) to increase its holding
from 38 percent to 87 percent in AHE and €248 million to increase
its stake in KAS from 47.1 percent to 84.2 percent.
“The agreement strengthens our long-term commitment to the Turkish
market, where we see a high potential for future growth,” said
Allianz board member, Enrico Cucchiani.
“The Turkish economy is the 15th largest in the world with
continuously high growth rates in real GDP during the last five
years. The country’s population is above 70 million, has a
relatively young demographic profile and still low insurance
According to Allianz AHE is the ninth largest Turkish life insurer
and at the end of September 2007 had a 4.8 percent market share.
KAS, Turkey’s third largest general insurer, had a 9.3 percent
China Life’s profit slumps
China Life, China’s biggest life insurer, has reported a net profit
of CNY3.47 billion ($496 million) for the first quarter of 2008,
down 60.9 percent compared with the first quarter of 2007.
Taking its toll was a tumbling equity market to which China Life
had an exposure equal to 20.96 percent of total assets as at 31
Measured in terms of the Shanghai Stock Exchange Composite Index,
Chinese shares lost a third of their value during the first quarter
of 2008. This was reflected in a CNY5.5 billion fall in the fair
value of China Life’s equity holdings in the first quarter of
China Life’s performance was made all the more unpalatable when
compared with that of nearest rival, Ping An which reported a net
profit of CNY7.1 billion in the first quarter of 2008, up 24
percent compared with the first quarter of 2007.
On a positive note China Life recorded gross written premiums and
policy fees of CNY101.6 billion in the first quarter of 2008, up
39.5 percent compared with the first quarter of 2007.
Aegon’s China asset management debut
Netherland’s insurer Aegon added an important new dimension to its
operations in China with completion of the acquisition of a 49
percent stake in Industrial Fund Management Company (IFMC), a
mutual fund manager with assets under management of about €3
billion ($4.7 billion).
The stake was acquired from Chinese broking firm Industrial
Securities which has retained a 51 percent stake in IFMC.
To be renamed Aegon Industrial Fund Management Company, IFMC
represented what Aegon termed “an excellent opportunity for Aegon
entering the fast-growing asset management market in China.”
Aegon added that the JV will also support its entry into China’s
Aegon entered China in 2002 following the establishment of life
insurance unit, Aegon-CNOOC, in a joint venture with the China
National Offshore Oil Corporation.
US insurers’ profits take a dive
Investment market turmoil dealt major US insurers’ first quarter
2008 profits a heavy blow.
Summing up the situation Prudential Financial’s CEO John Strangfeld
said in a statement: “Unfavourable financial market conditions
adversely affected our results this quarter. These conditions had a
negative effect on market values in our investment portfolio as
well as on the operating results of some of our businesses.”
Indeed they did. Prudential’s net profit of $77 million was 92.5
percent down on the first quarter of 2007’s $1.025 billion.
Close on Prudential’s heels The Hartford reported an 83 percent
fall in net profit, from $876 million to $145 million.
“Similar to other financial institutions, we reported considerable
capital losses this quarter, and returns on our alternative
investment portfolio were well below our expectations,” said the
insurers’ chairman and CEO Ramani Ayer in a statement.
Compared with Prudential and The Hartford, the US’ largest life
insurer MetLife fared well, reporting a 36.5 percent fall in net
profit to $648 million. Lincoln Financial also did well to limit
its net profit fall to 27 percent, from $396 million to $289
US individual life activity still in decline
Application activity in the US individually underwritten life
insurance segment continued declined in March, a trend that has
been evident for the past two years.
According to market analytical company MIB Group application
activity in March was 8 percent lower than in March 2007 while
activity in the first quarter fell 2.1 percent compared with the
first quarter of 2007.
However, of significance was that application activity in the 60
and over age group in March increased by 9.8 compared with March
2007. This age group has now shown steady growth for the last 12
consecutive months, noted MIB Group.
The biggest decline was in the up to 44 age group where activity in
March fell 3.0 percent compared with March 2007. Activity in the 45
to 59 age group lifted a mere 0.1 percent.
US insurers fall short on communications
The majority of US health insurers’ customers – 55 percent – do not
fully understand how to use their health insurance plan and member
services, according to a survey of 37,060 members of 107 large
health plans conducted by research and advisory firm J D Power and
Shortcomings include members’ understanding of plan details such as
prescription coverage, co-payments and how to appeal coverage
“Health insurer performance fluctuates greatly, even among
different regional plans from the same insurance company,” said JD
Power healthcare practice’s executive director Jim Dougherty.
“This lack of service consistency can present a real challenge for
human resources executives attempting to select the best health
benefits for their employees working in multiple regions across the
Dougherty added that with increasing healthcare costs and an aging
workforce that needs additional services, businesses have less
tolerance for insurers that are not consistently engaging members
and helping them manage their health care and costs.
“However, we find that those plan members who are most engaged by
their insurer through effective communication better understand how
to use their plans and also have particularly high satisfaction
levels,” said Dougherty.
“Those higher satisfaction scores translate into better retention
rates and more positive recommendations for the plan.”
CSC and Zurich extend relationship
Zurich Financial (Zurich) has awarded a six-year contract to US
technology service provider Computer Sciences Corporation (CSC) for
provision of electronic workplace desktop services to the Swiss
composite insurer’s businesses in the US, Canada, UK, Switzerland,
Germany, Italy and Spain. The contract, worth $399 million,
encompasses a total of about 51,000 Zurich employees.
The contract follows Zurich’s awarding of a seven year outsourcing
contract to CSC in July 2004. Worth $1.3 billion the contract is
one of the biggest ever in the insurance industry and covers
software applications development and support for Zurich’s
operations in the US, UK, Switzerland and Germany.
According to CSC, mid-way through the contract period operational
cost savings of 20 percent were being achieved for Zurich.
Insurer gives critical illness claimants benefit of the
UK insurer Friends Provident has reported a one third fall in
critical illness claims rejected in 2007 due to non-disclosure.
Specifically, 6.5 percent of claims were not paid due to
non-disclosure, down from 9.9 percent in 2006.
An additional 7 percent of claims were declined because the policy
definition was not met. This was down from an 8.8 percent rejection
rate in 2006.
Last year was the first full year that the insurer changed its
stance on reckless non-disclosure and started to pay a proportion
of a critical illness claim where unrelated non-disclosure had
“I am delighted that the three-pronged approach we have applied to
our range of protection products of education, simplification and
promoting a culture of fairness, is beginning to pay dividends,”
said Friends Provident head of protection Mark Jones.
The insurer reported that cancer was the most common cause of
claims, accounting for 62 percent of all claims. Cancer accounted
for 75 percent of claims by women and 47 percent of claims by men.
Cancer was followed by cardiovascular-related claims that accounted
for 12 percent of all claims.
However, cardiovascular-related claims accounted for a far higher
proportion of claims by men: 22 percent versus only 2 percent of
claims from women.
Brazil opens reinsurance market
Reinsurance Institute of Brazil’s monopoly of the country’s
reinsurance market held since 1939 has ended.
This landmark development follows publication of regulations by
regulatory body the National Private Council of Insurance that
permit establishment of new Brazilian reinsurers and for foreign
reinsurers to enter the market.
However, there are limitations on foreign participation. Among
these are that until January 2010 domestic reinsurers have first
right of refusal to a minimum of 60 percent of domestic insurers’
reinsurance business. Thereafter the minimum will fall to 40
percent of new reinsurance business.
Among foreign reinsurers that have announced their intention to
establish units in Brazil are Bermuda-registered XL Re and Catlin
Group, German-based Munich Re and Swiss-based Swiss Re.
According to Munich Re, Brazil’s reinsurance premium income in 2006