Aviva opts for
consolidation…
Legal & General goes
Nationwide…
Lucida off to a strong
start…
Axa UK snaps up SBJ
Group…
US regulators harness industry best
practice…

ASSET MANAGEMENT

Aviva opts for consolidation

UK insurer Aviva has announced a bold plan to consolidate its asset
management units in 15 countries into a single new entity managing
total assets of £316 billion ($623 billion).

The integration process will see, among others, Morley Fund
Management in the UK, Aviva Capital Management in North America,
Aviva Gestion d’Actifs in France, Portfolio Partners in Australia
and Hibernian Investment Managers in Ireland rebranded as Aviva
Investors, which is headed by CEO Alain Dromer. The integration is
due to be completed in September 2008.

“Over the past six months, Alain Dromer and his team have worked at
pace to put together a strategy that builds on our existing,
considerable strengths,” said Aviva group CEO Andrew Moss. “Aviva
Investors represents a new approach to asset management for Aviva
and will be a global business with an exciting future.”

Aviva believes the new structure will ‘significantly increase’
asset management’s contribution to Aviva’s profit over the next
five years.

DISTRIBUTION

Legal & General goes Nationwide

Insurer Legal & General’s (L&G) marketing reach in the UK
was given a significant boost in February when a distribution
agreement with the country’s largest building society, Nationwide,
went into operation. The agreement, which will see Nationwide’s
3,000 financial consultants market L&G life insurance, pension
and investment products, has the potential to become one of
L&G’s largest distribution platforms, said the insurer’s group
chief executive, Tim Breedon.

As part of the agreement with Nationwide, L&G has acquired
Nationwide Life and Nationwide Unit Trust Managers (NUTM) for £293
million. Nationwide Life has 478,000 life customers and NUTM
414,000 investment customers and as at 31 December funds under
management of £2.95 billion.

Nationwide, the world’s largest building society, has 13 million
members and is the UK’s second-largest provider of mortgages and
savings products. L&G has 5.5 million UK customers and, in
addition to its own direct salesforce, distribution agreements with
30 banks and building societies.

COMPANIES

Lucida off to a strong start

Lucida, a new UK insurer, has made its first mark in the market,
landing a major deal with Bank of Ireland Life (BIL). The deal
entails Lucida reinsuring over €100 million ($150 million) of
annuity business written by BIL plus the majority of the future
annuity business estimated to be worth another €40 million a year.
BIL is a wholly owned unit of the Bank of Ireland Group.

Lucida, which was officially launched on 17 January 2008, focuses
specifically on annuity and longevity risk business, including the
defined benefit pension buy-out market and the market for bulk
annuities. Lucida is owned by US private equity firm Cerberus
Capital Management, which has assets under management of about $25
billion.

Heading Lucida is executive chairman Jonathan Bloomer, a partner of
Cerberus’s European Capital Advisors unit. Among positions he
previously held, Bloomer was group CEO of UK insurer Prudential
from March 2000 until May 2005 and its group finance director from
January 1995.

Lucida’s managing director, Chris Wales, previously occupied the
position of a managing director in the Financing Group at
investment bank Goldman Sachs International.

DISTRIBUTION

Axa UK snaps up SBJ Group

In a move insurer Axa said would “significantly enhance” its UK
distribution capability, it has made a formal offer to purchase 100
percent of SBJ Group, which is described by Axa as a major
insurance broker and risk management consultant focused on the
mid-corporate market.

Subject to SBJ shareholder approval, SBJ will be absorbed by Axa
Advisory Holdings, Axa UK’s advisory and broking unit.

Commenting, Axa UK CEO Nicolas Moreau said: “Axa UK is firmly
committed to expanding its presence and expertise in advisory
services and in broking and SBJ will be joining a company with real
ambition in these areas.”

According to SBJ, turnover in its current financial year is
expected to exceed £85 million.

BANCASSURANCE

ING to boost distribution capacity

Netherlands bancassurer ING has announced plans to substantially
expand its retail branch network in its home country to meet what
it said is a growing demand for direct banking services in
combination with access to personal financial advice. The expansion
forms part of ING’s strategy to combine its Postbank and ING Bank
units under the ING brand.

As part of its expansion plan, ING is to transfer Postbank services
currently offered via 250 post offices to 283 new full-service ING
branches. In addition, ING will extend access of its 550 Postbank
outlets located in shops to ING Bank’s customer base. ING estimates
the total cost of the expansion project at €175 million over the
next five years.

The five-year period will also see ING and Netherlands courier
service company TNT gradually unwind Postkantoren, their joint post
office based service distribution venture. In anticipation of
restructuring costs involved, ING will take a provision of €87
million in the first quarter of 2008.

Overall, ING anticipates that the restructuring of its distribution
network will generate additional pre-tax earnings of €68 million
per year from 2012.

REGULATION

US regulators harness industry best practice

Annuity mis-selling and heavy-handed sales tactics have made
unpleasant headlines in the US in recent months. In response, three
US regulators – the Securities and Exchange Commission, the North
American Securities Administrators Association (NASAA) and the
Financial Industry Regulatory Authority – have launched a joint
initiative to identify strong supervisory, compliance and other
practices used by financial services firms in their dealings with
senior citizens.

Specific areas to be covered include marketing and advertising,
product and account review, ongoing review of the relationship and
appropriateness of products, discerning and meeting the changing
needs of customers as they age, surveillance, compliance reviews
and training of employees.

“Through this initiative we intend to spotlight successful industry
practices from which others may benefit,” said NASAA’s president,
Karen Tyler. “Strong regulation and heightened investor awareness,
combined with effective industry compliance and supervisory
systems, are necessary elements in the fight against senior
investment fraud.”

ACTUARIAL

Mortality tables target life settlement
market

Fasano Associates, a US firm of consulting actuaries, used a
conference organised by the German life settlements industry body,
the Bundesverband Vermogensanlagen im Zweitmarkt
Lebensversicherungen, as a platform to launch new mortality tables
for the settlement market. The tables specifically address
mortality in the over-65 age group.

Speaking at the conference, Fasano Associates’ president, Mike
Fasano, said: “We have undertaken extensive research on mortality
in the over-65 market, which shows distinct mortality patterns that
vary by the severity, or mortality rating, of the individual’s
health condition. These are groundbreaking findings that will allow
us to further refine our estimates of life expectancy.”

According to Fasano Associates, its estimates of life expectancy
are already among the most accurate in the business, with two
successive independent actuarial studies establishing a 96 percent
actual to expected accuracy ratio for its life expectancy
estimates.

ALTERNATIVE INVESTMENTS

Manulife drives deeper into forestry

Hancock Timber Resource Group (HTRG), a unit of Canadian insurer
Manulife Financial, has acquired TimberStar Southwest, a
900,000-acre portfolio of forestland in the US, for $1.71 billion
from a consortium headed by commercial property finance company
iStar Financial. The TimberStar Southwest properties were acquired
by the consortium in October 2006 for $1.19 billion.

The acquisition adds to HTRG’s already considerable forestry
holdings that it develops and manages for public and corporate
pension plans, high net worth individuals, foundations and
endowments. Located in North America, Australia, New Zealand and
Brazil, forestry assets managed by HTRG totalled C$240 billion
($240 billion) as at 31 December 2007.

MERGERS AND ACQUISITIONS

South African insurer expands UK reach

As part of its ongoing strategy to expand its wealth management
capabilities in the UK, South African insurer Sanlam is to acquire
a majority stake in Principal Investment Holdings (Principal), a UK
private client investment business managing assets of about £1
billion. Sanlam will acquire up to 86 percent of Principal for
about £35 million cash with the balance of the shares remaining
held by management and staff.

Commenting, Sanlam group CEO Johan van Zyl said: “Principal is the
type of high-quality private client investment business we were
looking for in the UK as another building block in our strategy of
growth and diversification through selective acquisitions,
geographical expansion and extended financial solutions to our
clients.”

Principal is Sanlam’s second acquisition in the UK wealth
management market after Merchant Investors, a player in the high
net worth life and pension markets. Sanlam also holds equity stakes
in UK intermediary distribution company Intrinsic and investment
management administration platform Nucleus.

INSURANCE PENETRATION

Australians grossly underinsured

What could be a golden marketing opportunity awaits Australian life
insurers, indicates a survey conducted by US bank Citibank. Despite
Australia being one of the most affluent nations, the survey
revealed that 48 percent of Australians have no life insurance; of
the 52 percent who do, one-third have inadequate cover to ensure
the well-being of dependants in the event of the insured’s death,
sickness or disability.

Looking at demographics, Citibank found men are more likely to have
sufficient insurance (39 percent) than women (29 percent). In
addition, 54 percent of women have no life insurance; the
equivalent result for men was 43 percent.

Also of note was that of Australians with children, 45 percent have
no life insurance. This increased to 53 percent for those with no
children.

According to reinsurer Swiss Re, life insurance premium income of
$28.3 billion generated by Australia’s life insurance industry in
2006 equalled 3.8 percent of GDP, well below the average of 5
percent for all Asian countries. Australia’s average premium income
per capita was $1,389 in 2006.

INITIAL PUBLIC OFFERING

Abu Dhabi insurer scores big IPO success

Amid equity market turmoil, Abu Dhabi-based insurer Mithaq Lil
Takaful’s nine-day initial public offering (IPO) in early February
achieved remarkable success, attracting offers totalling $980
million. This was over 43 times more than the $22.5 million the
Sharia-compliant insurer had targeted to raise for the 55 percent
of its share capital on offer.

The IPO was open only to citizens of the United Arab Emirates and
other Gulf states. Following Mithaq Lil Takaful’s listing on the
Abu Dhabi Securities Market in March, investors outside the region
will be permitted to buy up to 25 percent of its shares.

Investor enthusiasm for Mithaq Lil Takaful’s IPO is understandable
given the takaful industry’s strong growth prospects. According to
rating agency Moody’s Investors Service, total takaful premiums
worldwide were almost $2.5 billion in 2007 and are forecast to
reach $7.4 billion in 2015, a CAGR of 14.5 percent

 

JOINT VENTURES

Australian health and life insurers team up

Two Australian companies, private health insurer NIB Health Funds
and life insurer Tower Australia, have joined forces to launch a
joint venture (JV) that will market Tower life insurance products
branded as NIB Value Life Insurance (NVLI). Uniquely, the JV brings
together the only pure Australian life insurer and only health
insurer listed on the Australia Securities Exchange. NIB
demutualised in 2007.

“Customer research conducted during late 2006 revealed strong
policyholder interest in NIB offering more than just health
insurance, and for many, the move to the provision of life
insurance was seen as a natural alignment,” said NIB’s CEO, Mark
Fitzgibbon.

Initially, NVLI will target 10,000 NIB customers with a product
that can be bought online and requires no medical test for cover of
up to A$500,000 ($460,000). NIB, Australia’s sixth-largest health
insurer, provides cover for more than 700,000 people.

Tower is Australia’s fourth-largest life insurer, ranking behind
ING Australia, National Australia Bank and CommInsure, all three of
which are active in life and general insurance. According to Tower,
it had an 11 percent overall market share as at 30 September 2007
based on its total premiums in force of A$664 million.

MERGERS AND ACQUISITIONS

A boost for AEGON Hungary

Netherlands insurer AEGON and Austrian insurer Uniqa have reached
an agreement under which AEGON Hungary is to acquire 100 percent of
two of Uniqa’s Hungarian units, Heller-Saldo 2000 Pension Fund
Management Company and Uniqa Asset Management Company, for an
undisclosed sum. The deal will propel AEGON Hungary into second
position in the Hungarian mandatory pension fund market and into
third position in the voluntary pension fund market.

The acquisitions, due for completion in June 2008, will increase
AEGON Hungary’s pension assets under management from €1.6 billion
to about €1.9 billion.

Uniqa will remain represented in Hungary by Uniqa Biztosito, a
composite insurer in which it has an 85 percent stake. According to
Uniqa, its Hungarian unit ranks as the country’s sixth-largest
insurer.