News Digest

DISTRIBUTION

The Hartford seeks distribution synergy

US composite insurer The Hartford has embarked on an
initiative that will harness 10,000 independent agents nationwide
selling its property and casualty (P&C) insurance products as a
channel for cross-selling its pension, group benefits and
individual life insurance products to business owners.

“Research by The Hartford indicates that 78 percent of businesses
with 21 to 100 employees wish they could turn to a single source
for all of their financial needs,” said Ramani Ayer, The Hartford’s
chairman and CEO. “We want that single source for P&C, life and
investment products to be The Hartford.”

Leading the cross-sell initiative will be Greg Boyko, who will
relinquish his position as president and CEO of Hartford Life
Insurance K.K. in Japan. “Under Greg’s leadership, Hartford Life
Insurance K.K. grew from an unknown start-up to the market leader
in variable annuity assets under management in Japan,” commented
Ayer.

Prior to heading Hartford Life Insurance K.K, Boyko served as
executive vice-president and director of Hartford Life
International, responsible for the global expansion of insurer’s
investment products, life insurance and group benefits into Japan,
Brazil and the UK.

REINSURANCE

CSC to support Wilton Re’s growth strategy

Bermuda-based life reinsurer Wilton Re has selected technology and
outsourcing services provider Computer Sciences Corporation (CSC)
to undertake its business processing, a move that forms part of an
aggressive growth strategy.

The ten-year outsourcing contract, worth a total of $20 million,
covers full back-office administration services, including policy
and claims administration, customer service, billing and premium
processing.

“CSC’s transition experience and operational expertise allow us to
be agile and aggressive with our acquisition strategy,” said Enrico
Treglia, Wilton Re’s chief operating officer. “CSC’s back office
outsourcing services will also provide a predictable cost structure
and greater capacity to support future large-scale deals.”

Wilton Re is privately owned and was founded in 2004 with an
initial $628 million in equity commitments from investors. In March
this year Wilton Re secured an additional $300 million in funding
from a new investor, US investment bank Lehman Brothers.

ANNUITIES

Beware of free lunches, warns SEC

The US Securities and Exchange Commission (SEC) has released a
report in which it has slammed the use of what it termed “free
lunch investment seminars”. While typically advertised as
educational seminars or workshops at which no investment products
would be sold, the SEC said, the events were almost invariably
designed to entice attendees into buying investment products that
included variable annuities, equity indexed annuities, reverse
mortgages and mutual funds.

The SEC’s conclusion followed a year-long examination of 110
securities firms that sponsor sales seminars and offer a free lunch
to entice attendees. The SEC noted that no “problems or
deficiencies” were found in only five of the 110 examinations,
while at the other extreme indications of possible fraudulent
practices were found in 14 examinations.

The SEC said most of the firms examined were registered as
broker-dealers, and many were also registered as investment
advisers with a state or with the SEC. The examinations were
conducted by the SEC in conjunction with state securities
regulators and the Financial Industry Regulatory Authority, the
largest non-government regulator for all securities firms doing
business in the US.

INDUSTRY BODIES

LIMRA and LOMA agree to unite

In a sequel to discussions that began in November 2006, the boards
of LIMRA International and LOMA announced their formal approval of
the merger of the two insurance and financial services trade
organisations following a meeting held in late September. If
approved by members, the arrangement will become effective as on 1
January 2008.

The merger would bring together two of the world’s largest
financial industry organisations: LIMRA with 800 members in 70
countries and LOMA with 1,200 members worldwide. LIMRA and LOMA
will come together under the umbrella of a new not-for-profit
organisation to be called LL Global, Inc and headed by Robert A
Kerzner, president and CEO of LIMRA.

In the new structure, LIMRA will continue to conduct research and
benchmarking related to products, marketing and distribution. LOMA
will continue to provide education programmes to develop member
companies’ human capital.

DISTRIBUTION

IFAs prefer fee-based remuneration

The majority of independent financial advisers (IFA) and their
clients prefer the transparency that results from the use of a
fee-based remuneration structure, reports Scottish Life, the
pensions specialist arm of UK insurer Royal London Group. According
to Scottish Life, 87 percent of its regular premium new business is
currently being written using a customer-agreed remuneration
fee-based structure, primarily the financial adviser’s fee
commission option that it introduced about four years ago.

Traditional initial commission remuneration applies to the 13
percent of regular premium new business.

“Some research carried out by other providers has suggested a
possible degree of resistance from advisers and clients to the use
of customer agreed remuneration,” said Scottish Life’s sales
director, Jim Smith. “Our practical experience, over a period of
more than four years, demonstrates a much more positive view in
reality.”

ANNUITIES

UK postcode-rated annuities criticised

A pilot project launched in August this year by UK insurer Legal
& General (L&G) and investment advisory firm Hargreaves
Lansdown, in which postal codes form part of the determination of
income from non-profit annuities, has drawn harsh criticism from
retirement product specialist Just Retirement. At the time of the
pilot’s launch, L&G’s annuities business unit MD, Simon Gadd,
noted: “Where a customer lives can also influence how long they are
likely to live.”

Just Retirement’s head of annuities, Peter Ellis, said: “Whilst
acknowledging that postcodes are indeed used as rating factors in
many forms of [general] insurance, using this factor alone to
assess mortality is analogous to using only postcodes to assess
motor insurance premiums, without taking into account whether the
customer was driving a Ferrari or a Mini. To put this in
perspective, our own assessment process can take into account up to
1,500 medical conditions in addition to a customer’s postcode when
determining annuity rates.”

DISTRIBUTION

Life insurance available at UK Post Office

UK composite insurer Norwich Union and the Post Office Financial
Services (POFS), a unit of the UK’s Royal Mail, have forged an
alliance under which Norwich Union will distribute life insurance
products via the country’s 14,000 post offices. The Post
Office-branded products will also be available to purchase directly
via a call centre or the Post Office’s website.

The first product to be launched is a life insurance plan for
people aged 50 and over. According to Norwich Union, “it offers
simple, affordable life insurance for the over 50s without the need
for underwriting”. Another life insurance product will be launched
later in the year.

Norwich Union’s deal with the POFS builds on an existing alliance
under which Norwich Union markets general insurance products via
the Post Office. “The Post Office has already attracted well over
half a million insurance customers,” said the Post Office’s
director of insurance, Phil Ashkuri.

DISTRIBUTION

AEGON UK restructures

AEGON Scottish Equitable (ASE), the life and pensions unit of
Netherlands insurer AEGON’s UK business, has announced changes to
its sales operations that include formation of a new sales unit,
Corporate Solutions. AEGON explained that Corporate Solutions will
align itself with intermediaries that specialise in corporate
pensions and employee benefits products, and will extend the range
of services provided to corporate clients, including scheme design
and implementation, member communication and worksite
support.

In addition to the new sales unit, ASE has reorganised its branch
network, creating 12 regional sales centres each to be run by a
regional sales manager, supported by two sales development
managers, one focusing on corporate business and the other on
individual business. A dedicated annuity sales team is also being
created to provide support and expertise in this developing market,
said AEGON.

“We are making a significant investment in the quality of the
support we provide to advisers,” said ASE’s sales director, David
Rogers.

INVESTMENTS

ING discloses subprime exposure

ING Group reported in a filing with the US Securities and Exchange
Commission in late September that it has to date felt only a
“limited impact” from the turmoil in the US subprime mortgage
market.

The Netherlands bancassurer stated that as at 31 July 2007 its
exposure to subprime retail mortgage-backed securities (RMBS) stood
at €3.2 billion ($4.5 billion), representing 0.24 percent of total
assets, while its exposure to Alt-A RMBS stood at €28.7 billion,
representing 2 percent of total assets.

Alt-A RMBS would, for example, encompass those that include loans
to people with limited income verification or where the loan is
over 70 percent of a home’s value but does not exceed 100 percent
of the value.

ING said that as of 31 July, the negative revaluation of its
subprime and Alt-A RMBS holdings based on a mark-to-market approach
reflecting credit developments and prevailing interest rates
totalled €326 million. No net impairments have been necessary
through the income statement, added ING.

HEALTH INSURANCE

Hungary opts to go semi-private

In a landmark decision, Hungary’s coalition government has decided
to partially privatise the country’s health insurance system. The
new policy will entail private health insurers acquiring a minority
interest of up to 49 percent in health insurance funds the
government will establish in each of Hungary’s 19 counties and four
in the capital city, Budapest. At present, all funding of health
care is channelled via the state-financed Health Insurance
Fund.

According to the Hungarian Minister of Health, Agnes Horvath,
insurers will be permitted to bid for stakes in health insurance
funds in more than one county. However, to ensure competition
health insurers will be limited to a minimum of 500,000 members and
a maximum of 1.5 million. In addition, insurers will be permitted
to seek members outside their own counties. Horvath anticipates
that between eight and ten private health insurers will be active
in the Hungarian market.

PENSIONS

UK pensions gap widening

The UK’s pension gap is going from bad to worse, according to a
survey by financial services provider Alliance Trust. Of adults
over the age of 18 surveyed, Alliance Trust found that 26 percent
were making no provision for retirement, up from 20 percent in
2006.

The outlook is even bleaker for women than men. While 22 percent of
men stated that they are making no provision for retirement, up
from 17 percent in 2006, 31 percent of women revealed that they are
making no pension provision compared with 23 percent in 2006.

Alliance Trust’s survey also revealed that adults aged 30 to 49
were the least confident about their retirement. One in ten in this
age group said they were “totally unconfident” about their ability
to provide for a comfortable retirement while only 1 percent said
they were “totally confident” in this regard.

BANCASSURANCE

StanChart, Prudential get closer in Taiwan

Standard Chartered Bank (StanChart) and insurer Prudential have
announced plans to extend a bancassurance partnership dating back
to 1998. The two UK companies explained that the move followed
completion of the integration of Taiwan-based Hsinch International
Bank with StanChart’s existing Taiwanese units.

Hsinch International Bank, which was acquired by StanChart in
September 2006, added 83 branches to StanChart’s existing three and
propelled StanChart into the position of Taiwan’s largest
foreign-owned bank.

The upgraded bancassurance platform will feature in-branch and
direct marketing sales channels and a new dedicated salesforce of
200 financial planning advisers located throughout the bank’s
branch network. The dedicated salesforce will be in addition to
StanChart’s customer relationship managers in Taiwan, who already
sell some of Prudential’s products on a preferred partner
basis.

Commenting on the extended arrangement with Prudential, James Tan,
global head of bancassurance for Standard Chartered, said:
“Bancassurance is now an integral part of our retail banking
offering and it is essential that we provide our customers in
Taiwan with a full range of quality protection and medium- to
long-term savings products.”

DEVELOPING MARKETS

India’s life insurance market surges ahead

Total life insurance premiums received by India’s 16 life insurance
companies increased by 54 percent to $37.8 billion in the fiscal
year ended 31 March 2007, according to Indian life insurance
industry body the Life Insurance Council (LIC). The total number of
policies in force increased by 15.7 percent from 190.24 million to
220.14 million, of which group policies accounted for 11 million,
an increase of 3 percent.

The LIC also reported that total assets under management by the
life insurance industry stood at $152.5 billion at 31 March. Life
insurers were particularly heavy investors in equity, investing
about $37 billion in the asset class during the fiscal year.

Consultancy McKinsey & Co has forecast that India’s life
insurance premiums are set to reach between $80 billion and $100
billion by 2012.