Data loss risks licence loss

Australian insurers losing client data come under scrutiny from both the prudential and corporate regulators, and risk losing their licences, insuranceNEWS.com.au has found.

Last week the UK Financial Services Authority fined Zurich Insurance UK £2.275 million (US $3.97 million) for losing the personal details of 46,000 general insurance customers [see INTERNATIONAL].

AFA group to examine reforms

The Association of Financial Advisers (AFA) formed a group to look at the implications of the various proposed legislative reforms of the financial services industry.

The Future of Financial Advice Working Group will be jointly run by Aon Advice MD Pierre Kraft and Australian Financial Services MD Peter Daly.

Premium funders seek Treasury exemption

Insurance premiums funders are going to petition Federal Treasury for exemption to new credit licence regulations after the Australian Securities and Investments Commission (ASIC) rejected their submission.

Premiums funders must be registered with the new national consumer credit protection regime. Premium funders, alongside insurance brokers who help clients apply for or secure premium funding, and any other financial body providing credit, must be compliant by the end of the year.

BYD Co stock slides as results fail to meet expectations

BYD Co fell as much as 3.9% in Hong Kong trading on Monday, the lowest level in almost one year, after second-quarter profit was below analysts' expectations.

BYD posted a second-quarter profit of 717 million yuan ($106 million), less than the 962 million-yuan average estimate of four analysts surveyed by Bloomberg. It's the first time BYD, whose F3 car was the best-selling model in China in the first half, reported second-quarter results, and no year-earlier comparison was available.

Industry giants a study in contrasts

Top two insurers Suncorp and IAG are expected to deliver vastly different results when the pair unveil their end-of-year financials this week.

As Suncorp prepares to release a strong rise in net profit – tipped by analysts to be more than double last year’s result – struggling competitor IAG is forecasting a 50 percent reduction in profit once natural catastrophe and UK losses are taken into account.

Brokers flock to Auckland convention

As many as 800 brokers and other industry professionals attended the Insurance Brokers of NZ (IBANZ) annual Propel convention in Auckland last week, setting a new attendance record.

CEO Gary Young says the convention’s emphasis on education, a more flexible registration system and a range of concurrent sessions over two days were the factors that made the convention such a success.

“We had five concurrent streams running on Thursday and Friday, and the result was a terrific turnout,” he told insuranceNEWS.com.au. “The flexi-passes allowed companies to send three or four staff to sessions using the one registration fee.”

QBE revises executive structure

QBE revised its group executive structure, with Vince McLenaghan moving on from COO and Acting CEO Australia to become CEO of a new Australia-Asia-Pacific division. The other operating divisions are Europe and the Americas. Australia will no longer operate as a separate division. The Group COO position has been retired, with each division now responsible for its region’s operational issues.

Mr. McLenaghan will report directly to Group CEO Frank O’Halloran, alongside European operations CEO Steven Burns and the Americas CEO John Rumpler. Current Asia-Pacific CEO Mike Goodwin, who remains in Singapore, retains his role and will continue to report to Mr McLenaghan. The four executives join Global Head of Distribution Terry Ibbotson as part of the new Group Operations Executive.

Berkshire Hathaway posts 40 percent profit slump

Falling stock prices has contributed to a 40 percent slump in second-quarter profit for Warren Buffett’s Berkshire Hathaway as derivative contracts lost value amidst the slump in global stocks.

The firm posted USD 1.41 billion (USD 1.58 billion) in losses on derivatives compared with a profit of USD 1.53 billion (USD 1.71 billion) a year ago.

Net income dropped to USD 1.97 billion (USD 2.2 billion) from USD 3.3 billion (USD 3.69 billion) this time last year but the 79-year-old billionaire chairman had cause to cheer an operating profit increase of 72.7 percent to USD 3.07 billion (USD 3.43 billion).

The February 2010 takeover of railroad operator Burlington Northern Santa Fe was the main contributor, adding USD 603 million (USD 674 million) in the second quarter.

Union attacks Suncorp pay offer

Suncorp hosed down Finance Sector Union (FSU) criticism of the company for imposing a four year pay deal on employees with no guaranteed pay increases.

The union says Suncorp’s proposed pay deal offers no guaranteed across-the-board pay increases over four years, with workers on base pay entitled to a one-off 2 percent increase. Any further increases would come from a discretionary pool tied to measures such as performance.

The FSU and Suncorp are currently negotiating on a collective agreement for the company’s 17,000 strong workforce.

Former Westpoint manager to stand trial

Former Westpoint Chief Financial Controller Graeme Rundle is to stand trial in the Sydney District Court on criminal charges brought by the Australian Securities and Investments Commission.

Last week he was committed under the NSW Crimes Act with two charges of making a false statement with intent to obtain a financial advantage.

The charges relate to statements by Mr Rundle made in support of a $71 million credit facility to fund a Westpoint building project on York Street in Sydney. Each offence carries a maximum five-year jail term.

Munich Re profit climbs despite catastrophes

Munich Re has reported that net profit of EURO 1.19 billion (USD 1.3 billion) for the first half of this year, up from EURO 1.13 billion (USD 1.23 billion) in the same period last year.

Profits were aided by a 43percent increase in investment results in the first half to EURO 5.1 billion (USD 5.58 billion) from the same period last year, but undermined by major losses, especially in the reinsurance business.

Group operating result for the period was EURO 2.22 billion (USD 2.43 billion), up from EURO 2.11 billion (USD 2.31 billion) in the first half of last year, while gross written premium rose 9.3percent to EURO 22.6 billion (USD 24.7 billion).

Bancinsurance to be sold, taken private

Bancinsurance, specialty insurance company, is being taken private by a group led by John Sokol, the company's top executive and the son of the company's founder.


The company says it has agreed to be acquired for USD 8.50 per share in cash, a 70% improvement over the USD 5 per share that Sokol's group first offered for the company's shares in March.

Bancinsurance shares jumped more than 12% in trading today on news of the deal.

Sokol's group already owns 70% of the company's shares. Buying the remaining shares will cost about USD 13 million.

Competitive Financial Salaries

More than a half of Australian financial services staff received salary increases in the last year, keeping pay rates competitive with the rest of the Asia Pacific region.

But this does not mean firms should relax with regional competition for financial services staff likely to return as markets rebound and growth increases.

Financial recruitment firm Robert Half’s 2010 Asia-Pacific salary survey of 906 industry professionals found 53 percent of financial services staff in Australia received an increase in salary over the past year.

This was on par with 54 percent of employees from Hong Kong and 52 percent of staff in Singapore, and well above the 27 percent of staff who received raises in Japan.

AIG sees loss

The insurance giant AIG yesterday reported a USD538 million loss in the second quarter due to charges related to selling assets to repay the federal government bailout it received during the financial meltdown.

AIG's adjusted results excluding the charges beat Wall Street expectations as its insurance business improved. Its CEO also said discussions are under way regarding a government exit from its huge stake in the company. Its shares rose more than 4 percent in morning trading.

American International Group Inc. said its net loss attributable to common shareholders amounted to USD3.96 per share. It had a profit of USD311million, or USD2.30 per share, a year ago.

The net loss attributable to AIG was a larger USD2.66 billion. That is much bigger than the USD538 million loss attributed to its shareholders, because it includes the portion that the government is shouldering. The government owns 80 percent of AIG.

Removing the charges, AIG earned USD1.99 per share, up from USD1.71 per share last year. That reflected improved performance in its insurance business, despite heavy claims related to the Gulf of Mexico oil rig explosion and subsequent spill, storms and flooding in the U.S. during the quarter and the Icelandic volcano.

Tower Australia premiums

Life insurer Tower Australia has recorded a 10% growth in inforce premium for the June quarter due to strong growth in its group risk portfolio.

Group risk premium raised 21% to USD 465 million during the quarter, while individual life and income protection premium increased 3% to USD 577.4 million.

Tower’s total inforce premium for risk insurance obtained USD 1.04 billion.

TSX takes a fall

Yesterday The Toronto Stock Exchange posted its first decline in three trading days as the country's biggest insurance company delivered a record loss and U.S. jobless claims came in higher than expected.

The S&P/TSX composite index was down 70.28 points, or 0.59 per cent, to 11,774.77, with financials leading the declines.

Manulife Financial Corp. said it lost USD 2.4 billion in the second quarter, its worst loss since becoming a public company in 1999. Manulife stock declined 11.25 per cent to USD 14.20.

"Manulife has had a bit of a problem for quite a while now, and I think they're still trying to deal with it," said Fred Ketchen, director of equity trading with ScotiaMcLeod in Toronto. "But shareholders are impatient people sometimes. They don't like having to wait."

Buffett gets the wealthy

Forty wealthy individuals and families have joined Microsoft Corp co founder Bill Gates and billionaire investor Warren Buffett in a pledge to give at least half their wealth to charity.

Six weeks after launching campaign to get other billionaires donate most of their fortunes, the chairman and CEO of Berkshire Hathaway Inc. released the first list Wednesday of people who have signed what he and Gates call the "giving pledge."

Buffett decided in 2006 to give 99 percent of his fortune to charity. Then, he was worth about $44 billion. After five years of investment returns while making annual gifts to five foundations, Buffett's fortune totals nearly $46 billion.

Buffett said he, Bill and Melinda Gates, and a few others have made 70 to 80 calls to some of the nation's wealthiest individuals. The people who agreed to the pledge are from 13 states, with the most participants in California and New York.

Among those who haven't signed the pledge, some prefer to keep their philanthropy anonymous, some were not available to talk, and others were not interested, Buffett said.

Many on the list will be asked to call others, and small dinners will be held across the country in coming months to talk about the campaign.

High-Risk Pool Guidance Viewed As Anti-Abortion Victory

Anti-abortion activists have "scored a victory" after a decision last week by the Obama administration to not allow the new high-risk pools in America to cover most abortions, The Associated Press reports. Groups like the Catholic bishops had issued concerns when "at least one state - New Mexico - initially decided to allow coverage of elective abortion in a newly launched, federally funded program to provide coverage for high-risk uninsured people turned away by private carriers. Abortion foes also raised questions about Pennsylvania's plan, but state officials said the criticism was baseless. Trying to head off more problems, the Health and Human Services Department announced last week the program will not cover abortions except in cases of rape, incest or when the mother's life is in danger - exceptions traditionally allowed under federal law." That's different than in insurance exchanges that begin in 2014, which will allow consumers to have abortion coverage using their own, segregated funds than those from the government. Abortion rights activists say the restrictions in the high-risk pools go too far (Alonso-Zaldivar, 7/19).

The Hill: The decision by the Obama administration has sparked backlash from the American Civil Liberties Union. "In a message to supporters, Washington Legislative Office Director Laura Murphy asks that they pressure the White House to overturn its newly announced restrictions. 'The White House has decided to voluntarily impose the ban for all women in the newly-created high risk insurance pools,' Murphy writes. 'What is disappointing is that there is nothing in the law that requires the Obama administration to impose this broad and highly restrictive abortion ban. It doesn't allow states to choose to cover abortion and it doesn't even give women the option to buy abortion coverage using their own money'" (Pecquet, 7/17).

Tower Australia premiums grows 10%

Life insurer Tower Australia has recorded a 10% increase in inforce premium for the June quarter due to strong growth in its group risk portfolio.

Group risk premium climbed 21% to $465 million during the quarter, while individual life and income protection premium increased 3% to $577.4 million.

Tower’s total inforce premium for risk insurance reached $1.04 billion.

The addition of new income protection benefits for 700,000 members of the Australian Super superannuation fund was reflected in group risk new business results which climbed 207% to $85.7 million.

Life and income protection new business contributed $41.6 million, a 14% improvement over the March quarter.

Insurers profit off payouts

The package arrived at Cindy Lohman’s home in Great Mills, Md., just two weeks after she learned that her son, Ryan, a 24-year-old Army sergeant, had been killed by a bomb in Afghanistan.
It was a thick, 9-by-12-inch envelope from Prudential Financial Inc., which handles life insurance for the Department of Veterans Affairs. Inside was a letter from Prudential about Ryan’s $400,000 policy.
And there was something else, which looked like a checkbook. The letter told Lohman that the full amount of her payout would be placed in a convenient interest-bearing account, allowing her time to decide how to use the benefit.
“You can hold the money in the account for safekeeping for as long as you like,” the letter said.
In tiny print, in a disclaimer that Lohman says she didn’t notice, Prudential disclosed that what it called its Alliance Account was not guaranteed by the Federal Deposit Insurance Corp.
Lohman, 52, left the money untouched for six months after her son’s August 2008 death.
“It was a consolation prize that I didn’t want,” she said.
As time went on, she says, she tried to use one of the “checks” to buy a bed, and the salesman rejected it. That happened again this year, she says, when she went to a Target store to buy a camera on Armed Forces Day, May 15.