The Hartford gets a $2.5 billion
boost…
SWIFT to power reinsurance
platform…
Life-Exchange brims with
optimism…
Market veteran reports surging
volumes…
Aegon boosts its position in
Brazil…

COMPANIES

The Hartford gets a $2.5 billion boost

In a demonstration of its financial strength European insurer
Allianz is to pump $2.5 billion capital into US insurer The
Hartford Financial Services Group (HFSG).

The investment is in the form of $750 million in HFSG preferred
shares convertible to common stock and $1.75 billion in 10 percent
subordinated debentures. Allianz will also receive seven year
warrants entitling it to purchase $1.75 billion of common stock at
an exercise price of $25.32 per share, subject to shareholder
approvals.

Allianz’s move followed a 60 percent slump in HFSG stock price
between the end of September 2007 and September 2008, a fall almost
three times that of the Dow Jones Industrial Index over the same
period.

On its most conservative assumption HSFG estimates its book value
per share at between $41 and $44 as at 30 September 2008.

“We anticipate a favourable return on our investment,” said Allianz
SE’s chairman and CEO Michael Diekmann.

REGULATION

NAFA’s tough stance on SEC proposals

A proposal by the US Securities and Exchange Commission (SEC) that
it should regulate annuities which have their value linked to any
form of financial market index has met with stiff opposition from
industry body the National Association of Variable Annuities
(NAVA).

In its argument presented to legislators, NAVA stressed that
regulation of indexed annuities by the SEC would add unnecessary
costs and reduce the availability of a much-needed product that
provides modest benefit from positive market changes and protection
against market downswings which securities typically do not
offer.

“This proposal by the SEC was so hastily written and proposed that
it raises more questions than answers, adding millions of dollars
of cost to the insurance market and negatively impacting
consumers,” said NAFA’s executive director, Kim O’Brien.

The SEC argues that indexed annuities exposed purchasers to “a
significant investment” risk in the form of volatility of an
underlying securities index.

“Insurance companies have successfully utilised this investment
feature, which appeals to purchasers not on the usual insurance
basis of stability and security, but on the prospect of investment
growth,” stressed the SEC in a recent statement.

INDUSTRY TRENDS

SWIFT to power reinsurance platform

Efficiency and lower costs are among benefits of automated
straight-through processing that underlie an initiative to
establish a shared platform for electronic data transmission
between insurers, reinsurers and brokers.

The concept took its first step towards realisation in late-2007
with the launch of the Rüschlikon Initiative, an alliance between
insurance standards organisation ACORD, reinsurers Swiss Re, Munich
Re and Scor, and reinsurance brokers Aon, Benfield and Willis
Group.

The initiative took a big step forward in January 2008 when the
Society for Worldwide Interbank Financial Telecommunication (SWIFT)
came on board to provide the platform and network for premium and
claims accounting transactions.

A member-owned cooperative, SWIFT enables 8,300 banks, securities
institutions and corporates in 208 countries to exchange
standardised financial messages.

SWIFT, together with the original initiative partners, now plan to
establish a central electronic data transmission platform which
will be piloted for twelve months beginning in spring 2009.

“SWIFT has a track record of successfully reducing transaction
costs for the banking industry,” said Peter Arbenz, project leader
on behalf of Swiss Re.

“Together with ACORD’s insurance data standards and the clout of
six leading reinsurers and brokers, we have all the ingredients it
takes to offer our clients attractive solutions for their
reinsurance administration.”

REGULATION

NAIC acts to protect senior citizens

The US National Association of Insurance Commissioners (NAIC) has
received strong support for its adoption of the Senior Designations
Model Regulation aimed at protecting older consumers from
unscrupulous agents who use misleading senior-specific
designations.

According to the NAIC the model prohibits the use of designations
that have not been legitimately earned, that are nonexistent, or
that misrepresent a level of expertise or education that does not
exist.

It also specifies those organisations that are recognised as
accrediting valid senior-specific designations. These are the
American National Standards Institute, the National Commission for
Certifying Agencies and institutions of higher education.

“Life insurers strongly support laws and regulations that protect
consumers from unscrupulous practices,” commented Frank Keating,
president and CEO of The American Council of Life Insurers. “The
Senior Designations Model provides insurance regulators with a
valuable tool to protect consumers from individuals engaging in
these practices.”

LIFE SETTLEMENTS

Life-Exchange brims with optimism

Good news is pretty rare in the US financial market at present but
at least one company, Life-Exchange, has produced solid results and
an optimistic outlook.

Life-Exchange, which bills itself as the largest and only fully
independent electronic trading platform for the life settlement
industry, reported revenue for its fiscal year to 30 June 2008 of
$1.29 million, up $172,206 the previous year. The company, which
began generating revenue in the fourth quarter of calendar 2006,
also recorded its first net profit – $332,128 compared with a loss
of $711,043 in the previous year.

Commenting on the market, Life-Exchange’s president and CEO David
Dorr said: “As credit and equity markets continue to destabilise we
believe the life settlement market will continue to flourish as
consumers sell unneeded insurance policies to raise cash and as
investors seek safe havens in non-corollary assets. We believe the
coming year will bring Life-Exchange significant opportunities to
grow our profits.”

COMPANIES

Liberty Mutual’s personal touch

In a tough market customer satisfaction is more important than ever
– a reality underlying a free, group life case management service
launched by US insurer Liberty Mutual.

The service kicks in when Liberty Mutual receives a group life
claim. In response, it assigns a designated life case manager
certified in bereavement counselling and with an average of eight
years experience managing life claims.

The manager’s duty is to act as a single point of contact,
assisting the employer and beneficiaries with the life claim
process and paperwork and offering “other useful resources.”

Based on its own research Liberty Mutual believes the service
responds to a real need. In a survey conducted by the insurer 63
percent of group life buyers said they were “very likely” to lean
toward an insurer who could deliver this kind of support.

“Group life claims are far less common than claims from other
benefits programmes so a company’s benefits staff has less
experience handling death claims and interacting with
beneficiaries,” explained Liberty Mutual Group Benefits’
vice-president of marketing, Nazneen Vimadalal.

LIFE SETTLEMENTS

Market veteran reports surging volumes

In a seeming confirmation that the US life settlements market is
growing apace, industry pioneer The Lifeline Program (TLP) reported
a surge in the volume and value of transactions.

In a statement issued in September TLP said that it reviewed nearly
$15 billion dollars worth of life insurance policies in the past 12
months – a 300 percent increase compared with the same period last
year – while the average transaction size had increased from $1.4
million to $2.5 million.

“While reviewing our latest sales gains, several statistics jumped
off the spreadsheets,” commented Wm Scott Page, TLP’s president and
CEO. “The growth of our average transaction by 80 percent was
impressive and proves that the ongoing predictions of exponential
industry growth are being validated.”

TLP was founded by Page in 1989.

REGULATION

UK ombudsman to name and shame

There will soon be no place to hide for UK insurers and banks who
accumulate substantial numbers of complaints lodged by consumers
with the Financial Ombudsman Service (FOS).

The FOS has announced that as from next year it will begin
publishing data on the complaints it handles about named financial
businesses. The decision follows recommendations made in an
independent report by Lord Hunt of the Wirral published in April
2008. Lord Hunt is chairman of law firm Beachcroft’s financial
services division.

The FOS is seeking comments on its plans to publish half-yearly the
number of complaints referred to the ombudsman service in relation
to about 150 financial businesses which produce most cases and the
percentage of upheld complaints where the outcome changed in favour
of the consumer following the FOS’ involvement.

BANCASSURANCE

HSBC hones its UK distribution capabilities

Furthering its strategy in the UK bancassurance market, HSBC has
awarded financial services software specialist Focus Solutions a
contract to develop and supply the second major phase of a
large-scale, multi-channel point of sale system.

The contract, worth £4.9 million ($9 million), follows Focus
Solutions’ ongoing involvement in the development and deployment of
the first phase of HSBC’s comprehensive system to support the
bank’s distribution channels for life, pensions and investment
products. This phase of the project, which involved the award of a
£6 million contract to Focus Solutions, commenced in late 2006 and
is due for completion throughout the UK later this year.

The second phase of the deployment will focus on HSBC’s sales
processes via the independent financial adviser channel.

REGULATION

CEA in call for group-level supervision

Financial turmoil has confirmed the need for supervision of
insurers at group level, believes the Comité Européen des
Assurances (CEA), the European federation of insurers and
reinsurers. The CEA was reaffirming its long-held view at a time
when debate on the draft Solvency II Framework Directive is at a
crucial stage in the European Parliament (EP) and the European
Union Council of Economic and Finance Ministers. The directive is
due for adoption by the EP in 2009 and transposition into law in
member states by 2012.

“While it is obviously still too early to learn definitive lessons
from the current problems in the world’s financial markets, one
message is clear: a piecemeal approach to the supervision of large
financial groups does not work,” said the CEA’s director general
Michaela Koller.

Koller added that the Solvency II regulatory regime must be able to
identify the consolidated exposures of insurance groups and, in
this context, supervisors should be able to act in
co-operation.

COMPANIES

SBI Axa puts its trust in RiskMetrics

Recently launched Japanese insurer SBI Axa Life Insurance (SBI Axa)
has selected US risk management specialist RiskMetrics’ RiskManager
and CreditManager applications for its risk management and
reporting requirements.

“RiskMetrics Group offers a state-of-the-art integrated model for
risk management,” commented SBI Axa’s compliance and risk
management GM, Yohsuke Watanabe. “Insurance companies can only have
a complete picture of their financial risk if the market and credit
risk functions are integrated.”

Launched in April 2008, SBI Axa has adopted the internet as its
prime distribution channel. SBI Axa is 55 percent owned by Japanese
financial group SBI, 40 percent by French insurer Axa and 5 percent
by Japanese communications company Softbank.

COMPANIES

Allianz’s solid takaful progress in
Indonesia

Indonesia, home to 204 million Muslims, is a prime target for
insurers bent on expanding their reach in the Islamic, Sharia law
compliant-takaful market. European insurer Allianz therefore has
good reason to be pleased with the notable success being achieved
by Allianz Life Sharia, the takaful unit of Allianz Life Indonesia
(ALI).

Latest recognition of the unit’s success has come in the form of
ALI’s receipt of the “Best Syariah Life Insurance Branch” award
from Indonesian business magazine Investor Magazine. The award is
the second the Allianz Life Sharia unit has won this year and
follows receipt of the Best Islamic Insurer award from Karim
Business Consulting, an Indonesian takaful business consultancy, in
May.

In addition to the award, Investor Magazine also ranked ALI first
based on growth and investment return in the past year. Head of
Allianz Life Sharia Kiswati Soeryoko noted that over the past two
years the unit’s sales of takaful policies have grown at about 25
percent annually while premium income has grown by 300
percent.

Founded in April 2006, Allianz Life Sharia’s takaful products are
sold via all 80 of ALI’s sales offices in 44 cities by 3,400
agents. ALI also offers takaful products through its bancassurance
partnerships.

MERGERS AND ACQUISITIONS

Aegon boosts its position in Brazil

Furthering its expansion strategy in Latin America, Netherlands
insurer Aegon is to acquire a 50 percent stake in Brazil’s
sixth-largest independent life insurer, Mongeral SA Seguros e
Previdência, for an undisclosed sum. Established in 1835 Mongeral
is also Brazil’s oldest life insurer.

With 44 offices nationally, Mongeral distributes products through
3,000 registered brokers, serving some 350,000 customers. Mongeral
specialises in individual and group life insurance, pension and
savings products and is Brazil’s leading distributor of worksite
and labour union pension plans. In 2007, Mongeral had total
revenues of about €121 million ($170 million).

Mongeral adds to Aegon’s operations in Brazil, which include Aegon
Direct Marketing Services and its life reinsurer, Transamerica
Reinsurance. Elsewhere in Latin America Aegon has a joint venture
with Mexican life insurer Seguros Argos.

According to reinsurer Swiss Re, Brazil’s life insurance market
generated premium income of $18.29 billion in 2007.