Long-term care cover a must-have in the
Malaysians remain investment
Asian insurers on IT spending
Aegon bolsters position in
More consolidation in
US life insurance sales growth stalls
US life insurers made heavy weather in the individual life market
in the first half of 2008, with 55 percent of the 78 companies
participating in a survey conducted by financial services
association LIMRA International reporting declines in annualised
premium income. Three companies reporting declines ranked among the
Overall industry sales were flat compared with the first half of
2007, with the only bright spot being universal life (UL) which
recorded an 8 percent increase in sales. This was thanks to strong
UL sales in the first quarter of 2008 with second quarter sales
flat, noted LIMRA product research analyst Ashley Durham.
Variable universal life (VUL) products recorded the biggest sales
decline, falling 8 percent in the second quarter and 7 percent for
the first six months overall.
VUL products featuring guarantees did buck the trend, rising 2
percent in the first half of 2008. These products, however,
accounted for only 13 percent of total VUL annualised
According to industry body the Insurance Information Institute
individual life insurance gross premiums written in 2007 totalled
$142.87 billion, excluding reinsurance, representing 21.4 percent
of total direct premiums written by the industry.
LONG-TERM CARE INSURANCE
Long-term care cover a must-have in the US
US consumers who doubt the need for long-term care (LTC) insurance
may well be swayed to alter their view by findings of a study
conducted by US life insurer Prudential Financial.
Not only are LTC costs rising – by up to 13 percent since 2006 –
but are already at levels that could prove financially disastrous
even for those who have retired with a sizable nest egg.
“Many Americans mistakenly believe Medicare or private health
insurance will pay for their long-term care needs,” stressed Andy
Mako, senior vice-president of Prudential’s long-term care
The reality is long-term care risk is substantial and, under
current Medicare and Medicaid policy, much of it is the uninsured
private responsibility of individuals who pay for care and of
families who care for their relatives.”
Underscoring his point, Prudential’s study reveals, for example,
that the average yearly cost for an assisted-living facility is now
$38,892 while the average annual cost of a private room in a
nursing home is $79,205.
The most expensive state is Alaska with annual costs for these
services averaging $82,956 and $183,595, respectively.
Genworth talks up combined IFA unit
In a move aimed at strengthening its position in the US,
separately-managed accounts market Genworth Financial has merged
its two wealth management units, Genworth Financial Asset
Management and AssetMark Investment Services, under a new brand,
Genworth Financial Wealth Management (GFWM).
The US life insurer and financial services provider acquired
AssetMark in June 2006 in a deal worth up to $340 million based on
performance over five years.
According to the new unit’s co-chairman Gurinder Ahluwalia, GFWM
provides 500 independent financial advisors with one of the most
comprehensive fee-based investment management platforms in the
industry, in addition to client relationship management tools and
practice management programmes.
GFWM boasts some 4,500 independent financial advisers (IFA) and $18
billion in assets under management (AUM). This compares with a
combined total of 4,000 IFAs and AUM of $12 billion at the time of
Prudential sees rising equity release demand despite house
Despite falling residential property values in the UK, Prudential
remains upbeat on the equity release market’s potential.
Backing its optimism, the UK insurer achieved total new business
equity release mortgage advances in £117 million ($209 million) in
the first half of 2008, an increase of 75 percent compared with the
first half of 12007 and the highest half year sales since it
entered the market in 2005.
Based on data for property Prudential reported that despite a total
fall of £7.7 billion in the value of property equity owned by
people over 65 years old in England and Wales between February 2008
and May 2008 the value of equity in their properties still totalled
a massive £726.43 billion at the end of May 2008.
The data covers a total of 3.8 million households.
“In the vast majority of cases retired homeowners have built up a
significant amount of equity in their homes over a number of
years,” said Prudential director of lifetime mortgages Keith
“This, together with the rising cost of living means that many more
people are now looking to release equity from their homes to
maintain or improve their standard of living in
Barclays and Norwich Union strengthen ties
Barclays Bank and the UK’s largest life insurer, Norwich Union
(NU), have teamed up to market life insurance products to what the
bank termed “mass market customers” via the internet. Marketing of
the products branded as Simplified Life began in August.
Simplified Life incorporates level and decreasing term insurance
options sold on a non-advised basis via Barclay’s UK website which
offers customers are offered a quote option and a full application
facility. Cover offered is up to a maximum of £500,000 with monthly
premiums from as low as £5 ($9).
“The Norwich Union partnership enables us to expand our protection
offering to include life insurance, a product which is essential to
many customers,” said Gary Duggan, managing director for consumer
lending and insurance at Barclays.
As a launch incentive Barclays is offering a 15 percent premium
discount and shopping vouchers worth £15 to be used at retailer
Marks and Spencer. People obtaining a quote during September also
stand to win £24,000.
For NU, a unit of UK insurer Aviva, the life insurance alliance
strengthens ties with Barclays which since 2005 have included the
exclusive supply of motor, travel and home insurance products to
Aegon bolsters position in Spain
Further strengthening its position in Spain, Netherlands life
insurer Aegon has entered into an exclusive life insurance, pension
and health agreement with Spanish savings bank Caixa
As part of the agreement Aegon will acquire a 50 percent stake in
the bank’s insurance unit Caixa Terrassa Vida (CTV) for €90 million
“We are very pleased with this partnership, which is key in
securing access to the Catalonian market, one of the wealthiest
regions of Spain,” said Aegon CEO Alex Wynaendts.
Caixa Terrassa has about 300 branches and 500,000 customers in
Catalonia, a region with a population of 7.2 million.
According to Aegon, the alliance with Caixa Terrassa will boost it
into the position of the sixth biggest player in Spain’s life
insurance market which it first entered in 1980.
In 2007 CTV achieved gross written premium income of €215
With the formation of the alliance with Caixa Terrassa, Aegon now
has alliances with Spain’s top-five banks. The other four are Caja
de Ahorros del Mediterráneo, Caja Navarra, Caja de Badajoz and Caja
Bancassurance is the primary distribution channel in Spain,
accounting for some 70 percent of life insurance policy sales. In
total Aegon now distributes via 2,200 bank branches
Groupama and Ergo bid for Greek insurer
French insurer Groupama and German reinsurer Munich Re’s primary
insurance unit Ergo have emerged as the two bidders for an
undisclosed majority stake in Agricultural Bank of Greece’s (ABG)
insurance unit ATE Insurance.
Both bidders have submitted undisclosed binding offers that
incorporate the establishment of a bancassurance alliance with
A bancassurance alliance with ABG would provide access to its 470
branches which, according to ABG, represents the second largest
bank branch network in Greece.
Clearly both Groupama and Ergo see potential in the heavily
underinsured Greek market. According to reinsurer Swiss Re life and
general insurance premium income in the Greek market in 2007
totalled €2.26 billion and €2.13 billion.
Life insurance premium income represented a mere 1 percent of
Greece’s GDP while life insurance premium income averaged only
€277.20 per capita.
AGE reported that, as at 30 June, ATE Insurance had total assets of
€696 million ($1.02 billion) and had produced a net profit of
€500,000 in the first half of 2008.
Malaysians remain investment orientated
Despite investment market volatility, many Malaysian consumers are
receptive towards investment products, reveals a study conducted by
CIMB Aviva Malaysia, a joint venture between UK insurer Aviva and
Malaysian financial services company CIMB Group.
If in a surplus cash position, 27 percent of respondents would
leave the cash in the bank and 22 percent would invest in an
insurance product or a mutual fund. However, if certain
prerequisites were met a full 67.9 percent of respondents said they
would invest in an investment-linked insurance product.
The prerequisites are: guaranteed capital protection, geographical
investment diversification and insurance protection.
From a diversification perspective, Asia excluding Australia was
the preferred investment location of 74 percent of respondents with
markets such as China, India, Philippines, Indonesia, Thailand and
Malaysia of particular attraction.
Australia was chosen by 10.7 percent of respondents and Australia
North America by a mere 5.4 percent.
Asian insurers on IT spending spree
In a drive to improve their competitiveness, insurers in the
Asia-Pacific region are relying increasingly on information
technology (IT), according to Springboard Research.
Excluding Japan, the India-based firm predicts that IT spending by
the region’s insurers will rise from $3.2 billion in 2007 to $5
billion in 2010, a CAGR of 11.5 percent.
“After having relied on traditional ways of doing business for so
long, insurance companies across the region are now embracing IT in
a big way and are looking for new ways to reach out to their
customers,” explained Springboard senior analyst Nilotpal
“This focus on new market opportunities is one of the key drivers
for IT spending by the Asia Pacific insurance industry,” he
Though Australian insurers are currently the biggest spenders on IT
in the region, accounting for about 30 percent of the total
excluding Japan, Springboard predicts that the strongest growth in
IT spending will be seen in China and India.
In total insurers in Australia, China, Korea, India and Taiwan
account for 86 percent of IT spending in the region, excluding
More consolidation in Australia
Consolidation in Australia’s health insurance industry is set to
take another decisive step forward following Manchester Unity
Australia’s (MUA) board’s approval of an acquisition offer from
fellow not-for-profit health insurer HCF Australia (HCF).
The deal is subject to approval by MUA members who will share in
the proceeds of HCF’s A$256 million ($210million) offer.
MUA, Australia’s ninth-largest health insurer, would add 90,000
members, swelling HCF’s membership to 545,000 and entrench its
position as the country’s third-largest health insurer.
Highlighting consolidation in the Australian industry, MUA CEO John
Brogden said: “Health insurance is a rapidly consolidating market
and a company of Manchester Unity’s size would find it increasingly
challenging to continue offering the most competitive products and
If successful, the merger would be the Australian industry’s third
In the largest deal, UK health insurer BUPA’s Australian unit
acquired health insurer MBF for A$2.41 billion, a move that boosted
policyholder numbers to almost 3 million giving it a market share
of about 30 percent and creating the industry’s second largest
Shortly after the BUPA deal, Australia’s largest health insurer,
government-owned Medibank Private, announced it intended acquiring
Australia Health Management, a deal that would add 250,000 members
to its existing membership of 3 million.
Solidarity Group on expansion trail
The Saudi Arabian Monetary Agency has granted Solidarity Group, the
takaful insurance unit of Bahrain-based Ithmaar Bank, preliminary
approval to establish an insurance company in Saudi Arabia.
The new insurer is to be named Solidarity Saudi Takaful Company
(STC) and will initially offer Islamic law-complaint family takaful
(life insurance) and general takaful products.
STC will have a total capital of SAR555 million ($148 million).
Solidarity will contribute 60 percent of the capital with the
balance to be raised in an initial public offer prior to STC’s
listing on the Saudi Stock Exchange in the first half 2009.
Further extending its reach Solidarity has also announced the
establishment of a unit in Egypt, Solidarity Family Takaful Egypt
with an initial capital of EGP60 million ($11 million). Solidarity
also has plans to establish units in United Arab Emirates, Pakistan
Solidarity also owns Luxemburg-based Solidarity Takafol, originally
an independent takaful insurer established in 1983 and acquired by
Solidarity following its formation in 2003.
Solidarity Group has other strategic investments in Oman, Jordan