NewsIndustry
October 2008 21www.the-actuary.org.uk
Old Mutual US stake
takes hit on guarantees
The Financial Times has reported that Old
Mutual's US business needed a �150m
injection in recent months due to falling
equity markets.
Income guarantees offered as part of Old
Mutual's variable annuity products became
more costly, as higher than expected market
volatility in Asia took its toll. Old Mutual
had put in place appropriate hedges to
insulate itself from market fluctuations.
However, these only provided 60% of the
required protection.
Sales of the product in Asia had been
buoyant, nevertheless, Old Mutual has said
that it will now be withdrawing all products
with inadequate hedging.
Jim Sutcliffe, Old Mutual's CEO said that
the news had overshadowed an otherwise
robust performance.
Swiss Re acquires
Barclays Life business
Swiss Re has acquired the insurance
operation of Barclays via its closed fund
vehicle Admin Re. Paying �753m in a cash
deal, Swiss Re said it would acquire 760 000
new policies which Barclays closed to new
business in 2001.
Forecasting greater demand for life
and non-life run-off solutions, CEO
Jacques Aigrain said: "The difficult market
environment also creates new opportunities.
Underpinned by its strict underwriting
discipline, expansion in emerging markets
and new product offerings, Swiss Re has the
execution capability and capital strength to
seize these opportunities."
Aon the insurance broker has acquired
reinsurance intermediary Benfield for
$1.75bn. Greg Case, president and chief
executive officer of Aon Corporation said:
"Over the past several years, we have
made significant progress in strengthening
Aon's operational platform and global
network, becoming a more client-focused
organisation with a broader portfolio of
innovative products and services. With
Aon Benfield Re, we will build on this
progress to further enhance organic
growth, expand margins, and drive
shareholder value."
The transaction is estimated to facilitate
cost savings of over �65m a year, to be phased
in by 2011, primarily in the companies'
support and administrative areas.
Aon also acquires Benfield's successful
ReMetrics operation, which significantly
strengthens its quantitative offering, and its
presence in Florida and the US South East
coast. Benfield's strong links with the Asia
Pacific and Latin American markets are also
likely to have attracted Aon as it seeks to
expand in faster-growing regions.
Research by the website Moneyfacts has found that life assurance premiums have fallen
by as much as 50% on average over the past decade. This is in stark contrast to rises in the
costs of other insurance products such as motor and household cover in the same period.
The biggest beneficiaries are non-smokers, whose rates have fallen by 53% since July
1998, with females' rates seeing a 48% decline. Smokers have also benefitted, with the
average male rate falling by 48% and the female rate falling by 45% over the same period.
In the past 12 months, however, Moneyfacts has noticed a slight reversal of this trend,
with rates for non-smokers growing by 1.5% to 2.5% on average.
Richard Eagling, Moneyfacts' editor for life, investments and pensions, says that the
figures suggest that effects of increased competition have bottomed out. However, he also
commented that considerable variation in rates across providers could be seen, with quotes
being as much as five times more in some cases.
Further information can be found on www.moneyfacts.co.uk
Cable & Wireless, the telecommunications
giant, has entered into a bulk annuity buy-in
insurance agreement with the Prudential. The
agreement, the largest in the UK this year,
covers the pensioners `in-payment' element of
C&W's defined benefit pension scheme. Tony
Rice, Cable & Wireless group finance director,
said: "We are delighted that the Pension Fund
Trustee has secured this transaction, which
effectively reduces the Fund's exposure to
liabilities by over �1bn. The buy-in materially
reduces the Fund's and shareholders' exposure
to the future risk of adverse changes in
actuarial assumptions and investment returns.
The involvement of a financial institution
of Prudential's quality should provide our
pensioners with confidence that their fund
will continue to be well-managed."
Prudential in biggest pension scheme deal this year
Aon acquires Benfield for $1.75bn
Aigrain: difficult market gives great opportunities
Life cover bucks
price trend
SanjaGjenero

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