US annuity sales set new
Prudential Financial scoops
ACE returns to Swiss
Nippon ups stake in Principal
AIG pays up in
US annuity sales set new record
Last year proved to be a winner for participants in the US
individual annuity market, reveals data released by insurance
industry association LIMRA International. Led by strong performance
in the variable annuity (VA) market segment, total individual
annuity sales increased by 8 percent compared with 2006 to reach
$257.4 billion – a new record high.
“Variable annuity sales experienced strong growth in 2007 as
individuals leveraged guaranteed living benefit riders available in
VA products to protect themselves against recent market
volatility,” said Joe Montminy, associate research director for
LIMRA’s annuity research. The result was total VA sales of $184.2
billion in 2007, up 15 percent compared with 2006.
Maintaining this momentum, VA sales in the fourth quarter of 2007
were up 17 percent compared with the same quarter in 2006 at $48.2
billion. “This was the tenth consecutive quarterly increase in
variable annuity sales when compared to the same quarter from the
prior year,” noted Montminy.
Fixed annuity sales did not fare as well, declining 7 percent in
2007 to $73.2 billion. However, in the fourth quarter of 2007 there
were signs of improvement for fixed annuity with sales improving by
7 percent compared with the same quarter in 2006 to $19.5
LONG-TERM CARE INSURANCE
Prudential Financial scoops prestigious
A group long-term care insurance product designed for small and
mid-size employers has earned US financial services company
Prudential Financial the American Association for Long-Term Care
Insurance’s (AALTCI) prestigious Marketing Excellence Award.
Highlighting the significance of the AALTCI’s marketing excellence
awards, the body’s executive director, Jesse Slome, termed them
“the Academy Awards of the long-term care insurance
Slome explained that the awards recognise companies that have
created the best brochures, advertisements and promotional contests
during the prior year, in this instance 2007.
“When we designed this enrolment campaign, we began with one clear
goal – to give employers a turnkey solution for implementing and
managing an effective, long-term care insurance enrolment
campaign,” said Prudential’s group insurance vice president of
marketing management, Rea Kaschak. “Even though long-term care
insurance is a valuable employee benefit, many employers hesitate
to offer it because the enrolment process seems complicated,
time-consuming and just too overwhelming to manage,” he
ACE returns to Swiss roots
ACE Limited, the holding company of a diverse group of life,
general and reinsurance companies, has announced a redomestication
of the company that will see its place of incorporation move from
the Cayman Islands to Zurich, Switzerland. ACE plans to establish a
corporate holding company office in Zurich and continue to maintain
executive offices in Bermuda and New York.
“This move is part of the natural evolution of ACE from its
beginning over two decades ago as a monoline excess insurer owned
by its policyholders to a global publicly traded insurance company
operating throughout the developed and developing world,” said
ACE’s chairman and CEO Evan G Greenberg. “We believe that this
change in our corporate residency will provide us with better
strategic flexibility, a solid legal and regulatory environment,
and improved ability to manage our capital and our businesses,” he
In the year to 31 December 2007, ACE reported a net profit of
$2.533 billion, up 12.1 percent compared with 2006, and total
assets of $72.09 billion. Total net premium income in 2007 amounted
to $12.297 billion, of which $368 million was derived from life
insurance and life reinsurance business.
Nippon ups stake in Principal Financial
Japanese insurer Nippon Life has increased its stake in US
financial services company Principal Financial Group (PFG) to 7
percent, up from the 4.3 percent stake it acquired in 2001. Based
on PFG’s market capitalisation in late March, Nippon Life’s holding
in PFG is now worth just under $1 billion.
Commenting on the increased stake in PFG, Nippon Life’s MD, Kiyoshi
Ujihara, said in a statement: “Over the course of a long-term
business relationship, we’ve built a strong history of co-operation
and collaboration with the Principal.”
PFG’s diverse range of businesses include life and health
insurance, retirement and investment services and commercial
banking. According to PFG it has $311.1 billion in assets under
management and serves some 18.6 million customers worldwide.
Principal holds a 3.04 percent stake in Nippon Life’s US unit
Nippon Life Insurance Company of America.
AIG pays up in Pennsylvania
American International Group (AIG) has, without conceding
liability, agreed to pay a $9.1 million penalty to the Pennsylvania
Insurance Department (PID). The largest penalty ever handed down by
the PID, it relates to allegations levelled against the insurer by
the PID that it had filed false financial information.
The PID’s investigation had its origin in a federal charge brought
against four former senior executives of reinsurer General Re and
one former senior executive of AIG, relating to their involvement
in a scheme to falsely inflate AIG’s reported loss reserves by
using sham reinsurance transactions. In February 2008 the five
executives were found guilty by a federal jury.
The agreement between AIG and the PID also resolved bid-rigging
allegations against the company and requires AIG to implement new
compliance measures to ensure accurate reporting and increase the
transparency of commission payments to agents and brokers.
Scottish Re’s troubles deepen
March was a bleak month for beleaguered Bermuda-based life
reinsurer Scottish Re as it faced a swathe of bad news including
its suspension by the New York Stock Exchange and a hefty downgrade
by rating agency Moody’s Investors Services.
Moody’s action saw Scottish Re’s preferred stock debt rating
downgraded from B2 to Caa3 and left on review for possible further
downgrade, a move that Moody’s said was prompted by the reinsurer’s
“significant exposure to subprime and Alt-A investments [that]
could lead to additional losses going forward”. Securities worth
about $450 million are affected by the downgrade. In Moody’s rating
hierarchy, debt obligations rated Caa are judged to be of poor
standing and are subject to very high credit risk.
Adding further negativity, Scottish Re announced on 27 March that
it was postponing release of results for the fourth quarter and
filing of its regulatory documents for the 2007 financial year.
Scottish Re was due to report results on 27 March. In another
disturbing move the reinsurer announced that its CEO George Zippel
will leave the company in July, less than a year since his
appointment in August 2007.
MassMutual goes online to recruit
US life insurer Massachusetts Mutual (MassMutual) has adopted a
novel approach to recruiting sales agents: it has launched a new
website that it claims “introduces career changers, industry
veterans and college graduates to a career with MassMutual through
the eyes and words of its agents”.
The recruiting website is one of several initiatives launched by
MassMutual to attract new agents. These include:
• Recruitment of candidates with diverse backgrounds, including
female agents and multicultural candidates;
• Targeting of career-changers with transferable skills, such as
teachers, mortgage brokers and those from distressed
• Development of candidate pools for local agencies by matching
candidates to agencies by their personal background and personality
traits and the way they will fit within a certain type of agency
business model and market.
Commenting on the initiatives, MassMutual’s vice president
responsible for field force growth, Scott Rich, said: “Over the
past two years we have increased our net field force by 18 percent.
Our sales force continues to grow at a near record rate in
MassMutual’s history and our four-year retention rate has increased
MERGERS AND ACQUISITIONS
JC Flowers on the line
The UK Takeover Panel has instructed US private equity firm JC
Flowers that on or before 30 April 2008 it must either announce its
intention to make a firm offer for UK insurer Friends Provident or
announce that it does not intend to do so. The panel’s deadline was
issued following an approach made to it by Friends Provident and
has been agreed to by both parties involved.
Friends Provident’s request to the panel came a few days after it
had received a tentative acquisition proposal from JC Flowers
pitched at £1.50 ($2.99) per share. The proposal, which values
Friends Provident at about £3.5 billion, was subject to due
diligence and other conditions.
Receiving a cold shoulder from Friends Provident’s board, JC
Flowers was informed that its proposal “significantly undervalues
Friends Provident plc and its prospects and does not represent a
basis for discussion”.
Equitable Life ponders its future
Equitable Life is at an “important crossroads”, the 245-year-old UK
mutual insurer’s chairman Vanni Treves has stressed in an
announcement of preliminary results for 2007. While Equitable has
been closed to new business since teetering on the verge of
insolvency eight years ago, Treves explained that it is now in a
position to comfortably run the business off itself but is also “in
good shape for others to consider”.
Equitable completed a number of significant deals in 2007. These
included transfers of fixed pensions valued at £4.6 billion ($9.2
billion) to Canada Life, a unit of Canadian insurer Great-West
Lifeco, and with-profits annuities valued at £1.7 billion to UK
insurer Prudential. “The society is at last ready to address the
fundamental question of its longer-term future – to continue alone,
or to find a buyer,” said Equitable’s CEO, Charles Thomson.
According to Equitable it had total assets of £10.209 billion as at
31 December 2007. The realistic excess of assets over liabilities
was put at £621 million.
Investors scramble for ING paper
In the tough global capital market Netherlands bancassurer ING’s
announcement that its latest capital raising exercise has been a
big success is to be applauded. In the exercise ING raised €1.5
billion ($2.37 billion) by way of the issue of euro-denominated
perpetual subordinated bonds called ING Perpetuals IV.
According to ING, due to strong demand the issue was closed a day
early after just three days. The coupon was fixed at 8 percent with
issue price at par.
The majority of the issue was sold to retail and private banking
clients (75 percent).The balance went to asset managers, pension
funds and insurers, all of whom “showed a strong appetite”, noted
Investors are located in Benelux (48 percent), Switzerland (17
percent), the UK (11 percent), Asia (15 percent) and more than ten
other European countries.
Investing in the car park
Belgo-Netherlands bancassurer Fortis and French outsourced
infrastructure management company VINCI Concessions have set the
wheels in motion to create the world’s biggest player in the public
car park market. The new entity will be created by merging
Interparking, a unit of Fortis’ property division, and VINCI’s
VINCI Park unit in a deal that will leave Fortis as a “significant”
In total the new entity would manage 1,800 car parks in 16
countries, with a total capacity of 1.3 million parking places.
Interparking will contribute 480 car parks and about 235,000
parking places. According to Fortis, VINCI Park has a strong
presence in France, the UK, Spain and North America while
Interparking has strong presence in Benelux, Spain, Germany,
Austria and Italy.
Ritchie Capital vows to fight on
When US investment management firm Ritchie Capital Management (RCM)
voluntarily dismissed its claims for damages of $700 million
against life settlements broking firm Coventry First in February
2008, the matter appeared to have been laid to rest. Not so, it
seems. RCM has announced that it is preparing to refile its fraud
and breach of contract claims against Coventry First “in the near
In essence, RCM’s original claim, filed in May 2007, related to its
life insurance-based hedge funds, Ritchie I and Ritchie II, which
went insolvent as a result of losses it alleges were sustained on
life settlements policies bought from Coventry First.
“Coventry First caused several hundred millions of dollars of
damages to Ritchie I and II, to their lenders and to Ritchie
Capital’s investors, said RCM’s CEO, Thane Ritchie. “We are as
committed as ever to holding them responsible for their actions and
recovering these damages.”
To refile its claims Ritchie Capital is invoking a federal rule
that gives a plaintiff in a federal action a one-time right to
dismiss a case without prejudice and refile the same and other
claims at a later date.
Max New York Life sets the pace in India
Indian insurer Max New York Life (MNYL) has launched Lifeline
health insurance plans, a range of products it claims take health
insurance in India to “a new level”. Commenting, MNYL’s MD and CEO,
Gary Bennett, said: “We are excited to be able to offer health
insurance products that actually respond realistically to
consumers’ needs, which are far from being met.”
Among the firsts the products offer to the Indian market are:
• Fixed premiums for a five-year period;
• Incentives to promote a healthy life;
• Free second opinion from the best hospitals in India on diagnosis
• Free telephone medical helpline
Founded in 2000, MNYL is a joint venture between medical services
provider Max India and the largest US mutual insurer New York