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Sofia Ashmore

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State-rescued Royal Bank of Scotland on Thursday launched a partial flotation of its insurance subsidiary Direct Line Group on the London stock market ahead of a full sale of the unit by the end of 2014. 

RBS raised at least £787 million ($1.261 billion, 978 million euros) from the sale of around a third of Direct Line in an initial public offering (IPO), the bank said in a statement.

The offer price was set at 175 pence, valuing the entire group at £2.625 billion.

Direct Line shares were trading above the launch price, at 181 pence, in limited exchanges on Thursday ahead of the start of full trading of the stock next week.

The EU ordered RBS to sell Direct Line — a British leader in the fields of motor and home insurance — after the bank received massive amounts of state aid in the wake of the 2008 financial crisis. RBS must cede control of Direct Line by the end of next year and must have divested its entire interest by the end of 2014.

“We are very pleased to have successfully completed the Direct Line Group IPO as the first phase in our EU mandated disposal,” RBS finance director Bruce Van Saun said in the statement. “This is another important milestone in RBS Group’s restructuring plan.”

The Edinburgh-based bank last month said it would cut almost 900 jobs at Direct Line prior to the sale. RBS is 81-percent owned by the British government following a bailout that totalled £45.5 billion.

London, Oct 11, 2012 (AFP) 

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Fitch Ratings has assigned Coface a Long-term Issuer Default Rating (IDR) of ‘A’. The Outlook is Stable. Fitch has also assigned Coface Holding a Short-term IDR of ‘F1’ and an expected ‘F1(EXP)’ short-term rating to the EUR250m commercial paper (CP) which the company expects to issue later in 2012.

Coface Holding’s ratings reflect those of its wholly-owned major operational entities, and mainly the key entity which is Coface S.A. (Insurer Financial Strength (IFS) rating: ‘AA-‘/Stable; IDR: ‘A+’ Stable), and whose ratings were affirmed on 03 May 2012 (see ‘Fitch Affirms Coface’s IFS at ‘AA-‘; Outlook Stable’ at www.fitchratings.com.)

Coface Holding’s Short-term IDR is directly derived from Coface’s Long-term IDR according to Fitch’s standard insurance methodology.

The CP’s ‘F1(EXP)’ Short-term debt rating, which is subject to receipt of final documentation not materially differing from the original documentation, is at the same level as Coface Holding’s Short-term IDR. The CP’s short-term debt rating also reflects the EUR250m liquidity back-up line to be provided by high credit quality banks including: Societe Generale (‘A+’/Negative), Credit Agricole (‘A+’/Negative), Natixis (‘A+’/Negative), HSBC (‘AA’/Negative) and Royal Bank of Scotland (‘A+’/Stable).

Fitch considers the issuance of EUR250m CP as consistent with Coface group’s plans to progressively reduce its funding reliance on Natixis, its ultimate owner.

Fitch expects financial leverage at Coface group level to remain low and in line with its current rating as it expects the CP issuance to replace financing previously provided by Natixis rather than to increase financial debt levels. At end-June 2012 financial leverage (excluding operating debt) was 1%, unchanged from end-2011.

Although unlikely in the short to medium term, factors that could trigger a rating upgrade include an upgrade of the ratings of the core insurance operating activities of the Coface group.

The ratings could be downgraded if Coface group’s credit quality deteriorated so that its combined ratio remained consistently above 100% or there was a material and sustained fall in its current capital levels.

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Standard & Poor’s Ratings Services has lowered the rating on French insurer Groupama S.A.’s 2007 junior subordinated notes to ‘CC’ from ‘B’. They also lowered the issue ratings on Groupama’s 2005 and 2009 junior subordinated notes to ‘CCC’ from ‘B’.

S&P’s report follows :

At the same time, Standard & Poor’s lowered its long-term counterparty credit and financial strength ratings on Groupama and its guaranteed subsidiaries to ‘BB-‘ from ‘BB’, and on strategically important subsidiary Groupama GAN Vie to ‘B+’ from ‘BB-‘. We also lowered our long-term counterparty credit rating to ‘BB-‘ from ‘BB’ and affirmed our ‘B’ short-term counterparty credit rating on banking subsidiary Groupama Banque. We placed all these ratings on CreditWatch with negative implications.

The downgrade of Groupama’s €1 billion junior subordinated notes due 2007 follows Groupama’s announcement on Friday, Oct. 5, 2012, that it would not pay its coupon at the next interest payment date, Oct. 22, 2012. These notes contain optional payment features that allow the group to cancel coupon payments when Groupama’s solvency margin is above 100%. The rating action reflects the application of our criteria in the article “Criteria For Assigning ‘CCC+’, ‘CCC’, ‘CCC-‘, and ‘CC’ Ratings,” published Oct. 1, 2012, on Standard & Poor’s Global Credit Portal. We will further lower the rating on these notes to ‘C’ following nonpayment on the coupon, in accordance with our criteria.

The downgrade of Groupama’s two other junior subordinated notes issues reflects our view that Groupama’s decision to cancel the coupon increases uncertainty regarding its willingness and ability to continue paying interest on these issues. In the same way as the 2007 note issue, these two note issues are classified as having “intermediate” equity content according to our criteria and were issued in 2005 and 2009, for a total of €1,250 million. They contain optional deferral features when the solvency margin is above 100%, although we understand the next coupon payment on the 2009 notes is mandatory due to look back provisions relating to the interest payment that took place in July 2012 on the 2005 issue. However, it is possible for the regulator to prevent payment on all issues. The next coupon payment dates on Groupama’s 2009 and 2005 notes are respectively Oct. 29, 2012, and July 6, 2013.

The downgrade of Groupama reflects our belief that Groupama’s decision to cancel the coupon payment on the 2007 issue is likely to adversely affect Groupama’s financial flexibility, albeit partly offset by the relatively small positive impact on the group’s solvency margin and liquidity saving. We also believe Groupama’s decision could adversely affect the group’s business franchise in terms of non-life client retention and life policy persistency.

The CreditWatch placement reflects the uncertainty about the potential impact of Groupama’s decision on the group’s creditworthiness. In particular, we will assess the potential longer term benefits and costs associated with Groupama’s decision, including the potential impact on the group’s business and financial profile. In addition, we will assess the progress Groupama is making to improve its solvency position. We aim to resolve or update the CreditWatch action over the next 90 days.

We could potentially lower the long-term ratings on Groupama to the ‘B’ category if our assessment indicated a weaker business risk and/or financial risk profile than we currently expect. Our rating on its 2007 junior subordinated issue will be lowered to ‘C’ following the nonpayment of the coupon on the Oct. 22, 2012, interest payment date. Our ratings on its other two junior subordinated issues would be lowered to ‘CC’ if management notifies investors that coupons on these instruments will also be deferred.

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    Big Japanese insurers have stopped covering firms against riots in China, a report said Friday, a move seen likely to hit investment there as the countries remain stuck in a festering territorial row. 

    Major non-life insurers, including Tokio Marine and Nichido Fire Insurance, had been selling policies that cover damage from strikes, riots and civil commotion   But they have stopped accepting new applications for such riders or requests for expanded coverage since protests targeting Japanese businesses erupted in cities across China, the Nikkei newspaper said.

    Tens of thousands of demonstrators have rallied across China to vent their anger over Tokyo’s nationalisation of islands in the East China Sea known as the Senkakus in Japan and the Diaoyus in China.

    Some protests turned violent, with Japanese shops and factories often the target, forcing firms to shut or scale back production.

    The companies are evaluating the extent of damage suffered by existing policy holders, the Nikkei said.

    An official at an unnamed major insurer said the firm will probably not begin accepting applications again until the beginning of next year at the earliest, the business daily added.

    The Nikkei warned: “This is likely to affect Japanese companies as those that launch businesses in China will be uninsured against riots for the time being.”

    The number of Japanese firms operating in China topped 14,000 as of the end of August, the daily said, quoting a Japanese research institute.

    Insurance claims related to the protests may reach about 10 billion yen ($126 million), according to General Insurance Association of Japan Chairman Yasuyoshi Karasawa.

    Tokyo, Oct 5, 2012 (AFP)

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    Business Bermuda has released two major new studies including its 2012 Economic Impact Study and its Annual Top-of-Mind Awareness Survey. The Bermuda Economic Impact Study focused on the role of Bermuda in the world economy between 2004 and 2011 highlighting the dynamic nature of Bermuda’s international business economy and its relationship with key global economic powers including the United States, Europe and Asia.  This is the fourth annual Business Bermuda sponsored economic impact study, but the first study that measures the economic significance of Bermuda’s economic impact around the world and is made even more significant by highlighting Bermuda’s ability to adapt under the ongoing economic crisis. Business Bermuda also released highlights of its Annual Top-of-Mind Awareness Study for 2012, which benchmarks the jurisdiction’s progress in building awareness and understanding of its international business offerings and provides guidance on marketing and branding efforts.   

    The 2012 Bermuda Economic Impact Study is distinct from the prior economic impact studies, which primarily focused on Bermuda’s economic relationship with the United States and offered only brief insights on Europe and Asia. The 2012 study takes a close look at Bermuda’s long-term trade and investment relations with ten of its biggest economic partners and provides detailed statistical analysis of Bermuda’s economic role with the United States, Europe and Asia, including the financial centers in China, the United Kingdom, Switzerland, and Singapore.  The study also provides insights into the growing role that Bermuda provides for Ireland, the Netherlands, Germany, France, and Hong Kong.

    Cheryl Packwood, Business Bermuda’s CEO said, “Bermuda’s reputation for economic stability and its deeply experienced financial sector is key to the size of its economic profile in the world economy.  Particularly in times of economic challenges and financial volatility, Bermuda provides the world economy with an experienced investment and business environment that assures security, stability and cohesiveness.”

    The study reveals that Bermuda ranks as one of the largest economic actors in the world economy. The findings include:

    • In 2010, its two-way trade with the rest of the world was $80 billion.
    • In addition, Bermuda’s multinationals generated an additional $100 billion of direct sales in these ten large markets through its subsidiaries in the manufacturing and financial services sectors.
    • In 2010, Bermuda’s holding companies provided $939 billion of inward and outward direct investment for the world economy.  Bermuda’s businesses provided 600,000 jobs for the world economy.

    Bermuda Provides Real Value to the United States 

    Bermuda’s largest economic partner remains the United States and it is a powerful and important relationship. Key findings include:

    • Bermuda companies have a job-creating, direct investment position of $55 billion in the United States – more than the entire Caribbean, Singapore and Hong Kong taken altogether.
    • Bermuda is the 8th largest investor in the United States.  Even as other leading US economic partners pulled back from investing in the United States, Bermuda expanded its role in America.
    • Among other economic roles, the study shows that Bermuda provided financial stability and additional liquidity during the recent economic crisis.
    • Overall Bermuda’s bilateral business relations created 300,000 jobs in the United States.

    Asia Is a Large and Growing Partner with Bermuda 

    While Bermuda’s economic handprint is largest in the United States, its business relations are growing fastest with Asia.  The following highlights this relationship:

    • Trade with China Hong Kong and Singapore grew 200% between 2004 and 2011.
    • Bermuda holds $20 billion of investment from China and Singapore  – up from $1 billion in 2000.
    • By the numbers, Singapore is Bermuda’s leading Asian economic partner driven by shipping and insurance sectors.    Hong Kong SAR also stands out as it imports $1.4 billion a year in services from Bermuda.

    Bermuda – A Powerful Economic Force in Europe 

    Bermuda is a powerful and vital economic partner with Europe as illustrated by the following findings:

    • Bermuda is one of the top twenty economic partners with the European Union including $25 billion in two-way trade principally from insurance, financial and business services.
    • Switzerland and the United Kingdom stand out as strong economic partners although their position with Bermuda decreased during the economic crisis.
    • Ireland and the Netherlands share a special role with Bermuda in addition to the large relationship they share in trade in insurance services.  These long time “Holding Company” jurisdictions domicile US and EU multinational investment positions with Bermuda totaling $430 billion.
    • Bermuda is Ireland’s number one investment partner in the world.
    • As a result Bermuda exports $15 billion in business services to these two countries (Ireland and the Netherlands.)

    Commenting on the study, Dr. Charles Ludolph, a U.S.-based economist who conducted the study on Business Bermuda’s behalf said, “The study captures the four economic roles that Bermuda plays in the world economy.    Bermuda’s financial sector and regulatory governance provides financial stability in a time of volatile global capital flows.  Second, Bermuda is stepping up from its regional strength in providing a needed capital market for the United States in insurance and reinsurance and expanding into Asia and other markets.   Bermuda is finding a new role as an investment domicile for Asia.  And perhaps most important, Bermuda continues to support U.S. international business competitiveness with company law and regulation that meets the security needs of business but is responsive enough to lower costs in a tough international competitive environment.”

    A complete copy of the Bermuda 2012 Economic Impact Study is available at www.businessbermuda.org or upon request.

    Awareness of Bermuda Remains High in U.S., U.K. and Europe; Asia and the Gulf Show Gains; Reputation for Sophistication Presents Challenges and Opportunities 

    Business Bermuda’s Annual Top-of-Mind Awareness Study, which is used to benchmark progress and provide guidance on competitive positioning and marketing efforts showed that awareness and understanding of Bermuda in international business is high overall in key markets around the world. Sloane & Company, in partnership with regional firms, conducted 250 telephone interviews among a representative sample of Bermuda’s traditional base of clients in North America, London, Europe, Asia and the Gulf including lawyers, accountants, financial services and re/insurance executives between 1 August and 30 August 2012.

    Those findings include:

    • Traditional bases of business in N. America and London/EU demonstrate significant awareness/familiarity with Bermuda – over 90 % awareness levels.
    • Bermuda faces challenge in reinvigorating the discussion about its international business offerings as familiarity breeds complacency – reinvigorating discussion is important – better products, service, price, efficiency and ease-of-use.
    • Efforts by the Government of Bermuda, Business Bermuda and the private sector to enter new markets in Asia and the Gulf are working. Respondents to the survey in these regions are becoming increasingly familiar with Bermuda. Since the 2011 study, there was a 10 percent increase in overall awareness in Asia to more than 95 percent and an 18 percent increase to 78 percent in the number of people who indicated they were very familiar with Bermuda in the Gulf.
    • Not surprisingly given Bermuda’s long history of excellence and innovation in the insurance / reinsurance market, the executives around the world in this market sector continue to universally know Bermuda, which is remarkable in the context of any survey.
    • Lawyers and accountants in most markets are aware of Bermuda while traditional financial services executives– funds, wealth management – awareness of Bermuda remained largely the same.
    • Based on anecdotal discussions, Bermuda is making real strides in Islamic finance with respondents in the Gulf region highlighting several transactions where Bermuda played an integral role.
    • Bermuda’s strengths remain fairly consistent in major markets including sophistication, credibility of service providers, market reputation.
    • One issue that emerged is that Bermuda’s sophistication and reputation for substance are “double edged” swords. Respondents highlighted that Bermuda is great for complicated international business transactions and the most-established hedge funds as they enter the reinsurance market. However, when lawyers are looking at jurisdictions for the most basic, small and emerging hedge funds other jurisdictions appear to have a simpler and more efficient approach.
    • In addition, the lingering effects of the economic crisis in Europe and North America in particular remain a concern for the financial community and have caused investors and others to be more cautious. While not as significant as previous years, there are some concerns about the impact on tax and regulatory environments impacting offshore based on the outcome of the U.S. Presidential election in 2012.
    • In the Gulf and Asia, respondents highlighted that they are focused on the proximity of jurisdictions and the costs of doing business.

    Commenting on the study, Ms. Packwood said, “This research is very helpful in guiding our marketing efforts and providing a benchmark for our progress. The news out of Asia and the Gulf is heartening and confirms that we are investing time and energy and that is making a difference. We are also pleased with the research out of the U.S., U.K. and Europe as it shows we have not lost any ground in highly competitive markets and it gives us some clear indications on the issues we need to address.”

    Ms. Packwood continued:  “We have participated in wealth creation in other parts of the world at an exponential rate. We now need to take these two reports and use the information to our benefit, creating wealth and employment at home.”

    Business Bermuda will make available the Top-of-Mind Awareness Study to its members upon request based on the nature of the information and its use in marketing and competitive positioning of the jurisdiction.

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    AIR Worldwide (AIR) today announced the opening of an office in Singapore to meet the expanding needs of clients in the Asian insurance market.

    “AIR has kept pace with the fast-growing markets and our equally fast-growing client base in Asia by opening offices in India (2000), China (2005), and Japan (2008),” said Uday Virkud, P.E., executive vice president at AIR Worldwide. “The new office in Singapore ensures our ability to maintain — and indeed enhance — the high quality of service our clients in the region have come to expect from AIR.”

    AIR’s commitment to the Asia-Pacific insurance market has continued to grow over the past few years, and in 2012, AIR released a cyclone model for India and the industry’s first bushfire model for Australia. In 2011, AIR released its Multiple Peril Crop Insurance Model for China, another industry first, as well as a major update to its Basinwide Typhoon Model for the Northwest Pacific. Other offerings for the region include earthquake models for countries throughout Asia.

    The newly opened AIR Worldwide Singapore office is located at One Finlayson Green, #09-01A, Singapore 049246. Operations at the new office are run by Yen Chin, BEng (Hons), manager, business development; Ashish K. Jain, ARe, MBA, manager, client relations; and Apoorv Dabral, Ph.D., senior engineer, research and modeling.

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    The US government has raked in $15.1 billion in profits on its massive rescue of insurer AIG, the Treasury said Tuesday in a rebuff to critics of the 2008-2009 bailout of the finance industry. 

    The massive AIG rescue deal, using $182 billion of taxpayer funds to save the foundering insurer, finally turned a profit after the Treasury sold off 636.9 million shares Monday to private investors and the company itself, raising $20.7 billion.

    The share sale cut the Treasury’s majority shareholding in the company to 15.9 per cent.

    “Future sales of Treasury’s remaining AIG common stock holdings will provide an additional return to taxpayers,” the department said.  AIG, once the world’s largest insurer, received the largest chunk of bailout money from the government’s Troubled Asset Relief Program (TARP) deployed to stop a meltdown in the financial system.

    The bailout included both equity and loans from the Treasury and Federal Reserve aimed at shoring up AIG, which nearly collapsed after selling hundreds of billions of dollars in under-collateralized credit default swaps to banks and investment companies.  At the time it was feared that AIG’s collapse would bring down buyers of the swaps as well, sparking a chain reaction throughout the global financial system.

    But the rescue was deeply controversial, with critics saying the money put into AIG simply went toward paying off AIG’s counterparties, rather than having them take losses on their AIG-related investments.

    Critics said putting the company into bankruptcy would have been better for the economy and fairer for taxpayers.  The Treasury Department said that $353 billion of the $417 billion funds disbursed via TARP had been recovered before the newest AIG share sale.

    Mot of that has been from banks supported by the program. The government still faces substantial losses on TARP support of automakers Chrysler and General Motors, mainly from taking over GM’s finance arm, now known as Ally Financial.

    As of September 4, the government had only recovered about half of the $80 billion extended to the car makers.

    Washington, Sept 11, 2012 (AFP)

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    About 50 types of cancer have been added to the list of diseases eligible for coverage in a compensation program for people who became sick after the World Trade Center collapse on September 11, 2001, officials said Monday.

    The National Institute for Occupational Safety and Health said it had confirmed a recommendation made in June to include the cancers, which break up into 14 categories.

    “The final rule adds to the list of WTC-related health conditions each of the types of cancer proposed,” World Trade Center health program administrator John Howard said in a statement.

    A $4.3 billion fund is available for 9/11 health victims but until now cancer sufferers — believed to be in the many hundreds — have not been able to place claims of their own. The new rule will take effect in mid-October.

    Until now, most of the aid recipients, including local residents and emergency services personnel, have received compensation for respiratory diseases linked to the toxic dust and fumes from the fallen towers.

    In the ruling, some cancers are excluded, but 14 broad categories, containing dozens of different types, are included and sufferers would qualify for free treatment and compensation.

    Despite huge sympathy and political backing for victims of 9/11, the compensation decision has been held up by the scarcity of evidence of a direct link between the World Trade Center tragedy and cancer.

    The pool of money for the overall health program will not be expanded.  New York Mayor Michael Bloomberg welcomed the news, which came on the eve of the 11th anniversary of 9/11.

    “We have urged from the very beginning that the decision whether or not to include cancer be based on science,” he said.

    “Dr Howard’s decision, made after thorough consideration of the latest available research and data, will continue to ensure that those who have become ill due to the heinous attacks on 9/11 get the medical care they need and deserve.”

    Three New York congressional representatives — Carolyn Maloney, Jerrold Nadler and Peter King — said the announcement was “great news” ahead of the 9/11 anniversary.

    New York, Sept 10, 2012 (AFP) 

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    According to catastrophe modeling firm AIR Worldwide, yesterday, the core of Tropical Storm Leslie passed 120 miles (200 km) east of Bermuda, bringing sustained winds of 39 mph (and gusts of up to 54 mph) and heavy rains to the island. Currently, Leslie is accelerating north-northeast toward Atlantic Canada with a forward speed of 18 miles per hour, and is expected to make landfall on Newfoundland on Tuesday morning as a tropical storm or a weak Category 1 hurricane.

    “With a minimum central pressure of 988 mb and maximum sustained winds of 60 mph, Leslie is maintaining tropical storm strength as it continues on its north-northeasterly track toward Newfoundland,” said Scott Stransky, senior scientist at AIR Worldwide. “As Leslie moves north, surf and rip currents are diminishing throughout the Caribbean. However, the risk of high surf and rip currents along the east coast of the United States, northern Bermuda, and the Canadian Maritime Provinces remains significant.”

    Currently about 805 miles (1300 km) from Cape Race, Newfoundland, Leslie is expected to make landfall in Newfoundland on Tuesday morning, close to the provincial capital of St. John’s. Stransky continued, “Although Leslie now exhibits maximum sustained winds of 60 mph, warmer-than-normal ocean waters south of Canada’s eastern seaboard and fast steering currents may facilitate Leslie’s strengthening to a Category 1 hurricane, with winds of about 75 mph, before it makes landfall on Newfoundland. However, Leslie is expected to cause much less damage than Hurricane Igor, which struck Newfoundland in 2010 with maximum winds of 85 mph and inflicted damage of USD 200 million.”

    Due to its strict building codes and effective code enforcement, Bermuda has escaped the effects of Tropical Storm Leslie with only scattered power outages, isolated fallen trees, and brief disruption to public transit and airline service.

    According to AIR, both residential and commercial buildings in Bermuda are exceptionally well prepared to resist hurricane damage. Residential buildings on the island are characterized by masonry block construction, with roofs formed of limestone tiles cemented together to form a strong, unified structure.  Wood frame homes, which are much more vulnerable to tropical cyclone winds, are not common. With their reinforced concrete construction, commercial buildings such as hotels are also well-suited to withstand hurricane force winds. Buildings in Bermuda also commonly have colonial shutters to protect window openings.

    Stransky concluded, “By mid-Tuesday, Leslie will transition from a tropical storm to an extratropical storm, with anticipated maximum wind speeds of 60 mph.”

    Elsewhere, AIR is tracking Hurricane Michael, this season’s first major hurricane. However, Hurricane Michael poses no threat to land due to its position in the middle of the Atlantic and forecast track.

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    Fitch Ratings indicates in a new report that capital market alternatives to reinsurance from sources such as catastrophe bonds (cat bonds), collateralized quota-share reinsurance vehicles (sidecars), and other risk transfer structures represent an increasingly viable alternative to the use of traditional reinsurance. However, to the extent that hardening insurance market conditions diminish into 2013, Fitch would expect less overall utilization of capital market reinsurance alternatives than recent experience in 2011/2012.

    Fitch views the growth and acceptance of alternative reinsurance as a mixed benefit to reinsurers. Favorably, it represents an option to manage reinsurers’ exposure and capital and serve as a source of fee income. Negatively, it represents competition for traditional reinsurers that, in conjunction with the strong overall capitalization of the reinsurance industry, has worked to notably dampen reinsurance pricing momentum in 2012.

    Fitch believes that the comparatively high potential returns of catastrophe bonds and sidecar investments, and the lack of correlation between catastrophe losses and returns on other major asset classes should continue to contribute to strong demand from certain investors, including hedge funds, private equity, and institutional investors.

    Convergence of the reinsurance market and capital market through cat bonds continues as 2012 is likely to have the highest total dollar amount of issuances since the prior record year of 2007. However, Fitch believes that several structural issues inherent in the market will likely keep cat bonds as a niche asset class in the near term, supporting $5 billion-$8 billion of annual volume and up to $20 billion of outstanding issuances.

    Over the last decade the sidecar vehicle has emerged as a more efficient and flexible preferred option to traditional start-up (re)insurers. This is especially the case for the retrocessional property catastrophe market, where near-term pricing opportunities can be very advantageous post-catastrophe event, but also short lived.

    Fitch also notes that most of the recent start-up reinsurers were created and funded by several well-known hedge fund managers seeking a more long-term asset management vehicle. Fitch believes that the long-term future of this approach ultimately depends on its relative success over the entire market cycle.

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    US President Barack Obama called Saturday for protecting Medicare — a government-run health insurance program for the senior, drawing a sharp distinction between his plan and that of his Republican opponents.

    “Here in America, we believe in keeping our promises – especially to our seniors who have put in a lifetime of hard work and deserve to enjoy their golden years. That’s what Medicare is all about,” the president said in his weekly radio and Internet address.

    “That’s why we need to strengthen and preserve it for future generations,” he continued.

    “And as long as I have the honor of serving as your President, that’s exactly what I’ll do.”

    Medicare emerged as a campaign issue earlier this month, when Republican presidential hopeful Mitt Romney chose Representative Paul Ryan of Wisconsin as his running mate.

    Ryan is known for his broad and controversial plan to reduce government spending, which included a reform of Medicare, whose costs are projected to increase to over $920 billion a year by 2020, threatening the program’s solvency.

    Ryan’s plan calls for keeping Medicare unchanged only for people aged 55 and over and introducing a voucher option for the younger generation. Under the plan, the vouchers would be used to purchase private health insurance. But Obama argued the Republican plan would hurt rather than help the senior.

    “That means that instead of being guaranteed Medicare, seniors would get a voucher to buy insurance, but it wouldn’t keep up with costs,” he said.

    “As a result, one plan would force seniors to pay an extra $6,400 a year for the same benefits they get now. And it would effectively end Medicare as we know it.”

    The president said he was willing to work with anyone to keep improving the current system.

    “But I refuse to do anything that undermines the basic idea of Medicare as a guarantee for seniors who get sick,” he said.

     

    Washington, Aug 25, 2012 (AFP)

     

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    Financial highlights:

    –        General business gross written premium of £240.7m (£235.2m in H1 2011)

    • UK GWP at £177.0m (£170.3m in H1 2011)

    –        Turnover of £259.3m (£251.8m in H1 2011)

    –        Pre-tax profit of £8.0m (£16.8m profit in H1 2011)

    –        Investment returns of £22.3m (£24.3m in H1 2011)

    –        Underwriting loss of £14.4m (£6.0m loss in H1 2011)

    –        Group combined operating ratio is 109.9% (104.0% in H1 2011)

    • UK COR at 100.2% (94.4% in H1 2011)

    –        Shareholders’ funds decreased to £430.5m (£436.1m for full year 2011)

    Commenting on the results Group Chief Executive Michael Tripp said: “These are steady results in turbulent times. Considering we’re operating in an environment that’s more volatile than ever, a pre-tax profit of £8m at half year puts us in a strong position for the rest of the year.

    “We’ve seen modest growth for our Group in the first six months, with the UK business in particular delivering results in key business areas in line with expectations and achieving a near break-even COR. The Group turnover and GWP remain stable and broadly in line with 2011 figures.

    “Our core business, particularly the Charity and Education books, are performing well and have contributed significantly to the half year results. We’re also making strides in our targeted UK growth areas, such as the Property Investors market, where, only 14 months after launch, we’ve already secured significant business and recently received industry recognition for our product at this year’s British Insurance Awards.

    “Our investment returns have also continued to weather the storms of the Eurozone crisis and have helped offset the poor underwriting result. Although marginally down compared to the same period last year, our investment returns remain strong and continue to deliver good returns for both the Group and our investors.

    “However, it is clear that our UK underwriting result needs improvement and the Group COR of 109.9% is higher than we’d like it to be. Our general business underwriting loss is a result of unprecedented UK weather conditions in the second quarter, the continuing challenges in Australia and our Group suffering the same difficult performance in household business that is currently affecting everyone in the market. Liability issues also continue to cause concern for us, particularly on the care account.

    “We’ve already taken action through rate increases to improve profitability in the second half of the year, but understand we need to be even faster in implementing the increases and must do even more to see better performance at the end of the year and into 2013.

    “Returning underwriting profitability isn’t our only focus for the rest of the year, however.  The steps we’ve taken this year to improve our customer service, enhance our proposition to brokers and improve our underwriting result are already starting to pay off and I see them serving us and all our customers well in the long term.”

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    Aon Hewitt announced that it ranked first in three major categories in NelsonHall’s Targeting Benefits Administration market analysis report published last month.

    Aon Hewitt ranked number one in terms of revenue in the global benefits administration market, the North America benefits administration market as well as the total Health and Welfare (H&W) administration services market, which includes revenue from H&W administration, reimbursement account administration, leave of absence administration, and COBRA administration.

    “Aon Hewitt is proud to be a leader in the benefits administration outsourcing industry, and our long-standing partnership with our clients has enabled us to learn from their needs and expand the scope of our services to better serve them,” said Shauna Cooper, CEO HR Outsourcing, Canada. “With our clients, we have created the industry standard for how a successful HR outsourcing model can produce innovative and sustainable results, and we are honored to be recognized as top provider.”

    In addition to those recognitions, Aon Hewitt ranked second in terms of revenue in the global pension/retirement administration market and the flexible benefits administration market.

    ”With new regulations and compliance requirements, Aon Hewitt is one of a few service providers in the benefits administration market with an extensive portfolio of offerings to meet client needs,” said Amy L. Gurchensky, HR outsourcing research analyst at NelsonHall. “Our research shows that benefits administration offerings are expanding as a result of health care reform and wellness initiatives, and Aon Hewitt is at the forefront with offerings such as its health insurance exchanges and dependent audit services.”

    NelsonHall’s Targeting Benefits Administration market analysis consists of a 127 page report that analyzes the changing shape of benefits administration, customer requirements, market size and growth, plus an extensive service provider assessment which includes vendor market shares, offerings, delivery capabilities, the role of technology, vendor targeting, as well as challenges and success factors for service providers.

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    The latest Business Crime Index from AXA Commercial Lines and Personal Intermediary shows levels of crime committed against businesses in the UK have grown by 16% in the worst hit areas, while across the UK the cost of theft has increased significantly alongside a rise in the use of violence.

    – 3% increase in crime for two years running

    – worst hit areas see 16% rise in crime

    – cost of crime is hundreds of millions of pounds

    – average theft rises in value by 6%

    – violent thefts climb by 6%

    – arson rates up by 10%

    The findings, taken from AXA’s business insurance claims records to end May 2012, suggest that the riots of last summer contributed to an overall 3% increase in the level of crimes against businesses during the last twelve months.  However, riots aside, the increase reflects a general and continuing upward trend of crime against business in the last two years with a 3% increase also recorded for the previous year. In the top ten worst affected postcode areas of the country (see list below) the rise in crime rates over the last year has been 16%.

    AXA estimates the total cost of business crime runs into several hundred million pounds with many businesses unable to claim back costs due to insufficient insurance provisions.

    Types of Crime

    The most common crime committed against business is theft accounting for around 74% of the total volume.    And while numbers of thefts have risen only slightly over the last twelve months there has been a significant rise of 6% in the average value of theft claims to just under £4000.  The number of thefts involving force or violence has also increased by around 6%.

    AXA revealed that, aside from riot claims, arson was the crime that saw the biggest rise last year with around 10% more cases while malicious damage claims against businesses dropped by around 10%[1].

    Matthew Reed, Managing Director, Intermediary for AXA Commercial Lines and Personal Intermediary says: “In a continued period of recession it is no surprise to see business crime levels rising, reaching costs of several hundred millions of pounds across the UK.

    “It’s important to understand when, where and what types of crime businesses are experiencing, as it helps AXA work together with its intermediary partners to identify and manage risk, and ensure that businesses have adequate cover for their needs.

    “We would urge brokers to use this opportunity to review clients’ insurance needs and ensure they are properly covered. A loss for a small business can be devastating, and it’s only right that we work together to ensure peace of mind for SME owners should the worst happen.”

    The UK’s Business Crime Hotspots

    When looking at geographical spread the table below shows the places with the highest rates of business crime across the UK in the 2011/2012 period and the twelve months prior to this.

    TOP TEN AREAS FOR BUSINESS CRIME

    BY POSTCODE REGION
      June 2011 – end May 2012 June 2010 – end May 2011
    1 Halifax Walsall
    2 Telford Wolverhampton
    3 Oldham Coventry
    4 Luton Derby
    5 Doncaster Oldham
    6 Dudley Telford
    7 Wolverhampton Milton Keynes
    8 Wigan Dudley
    9 Walsall Lincoln
    10 Bolton Wigan

    – Halifax was in at number one this year after experiencing the second highest climb in crime rates in the UK over the last twelve months.  Its position in 2010/11 was 57.

    – Other newcomers in the top ten for 2012 are Luton, Doncaster and Bolton while Coventry, Derby, Milton Keynes and Lincoln have dropped out of the top spots since 2011.

    – In terms of actual numbers of crimes against businesses, South West London is top followed by Leeds and Birmingham.  But as overall numbers of business are also much higher in these areas, relative rates are lower keeping them out of the top ten.

    – The postcode area with the biggest rise in crime rates was Sutton, with numbers of crime up by 140%, taking them to 19th place overall in the UK.

    – The postcode area with the biggest significant fall in overall crime was Kilmarnock where numbers dropped by 42%.


     

     

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    According to catastrophe modeling firm AIR Worldwide, Tropical Storm Ernesto made its second landfall on Thursday, August 9 at around 1:00 PM CDT in southern part of the Mexican state of Veracruz. Wind damage is expected to be minimal, but the storm’s heavy rainfall is expected to continue throughout the day, even as the system dissipates. Significant insured losses are currently not expected from Ernesto. Interestingly, global models suggest that the remnants of Ernesto may redevelop into a tropical cyclone early next week after exiting into the Eastern Pacific.

    “Ernesto made its first landfall in Quintana Roo late Tuesday night local time at Category 1 hurricane strength (with maximum sustained winds of approximately 85 mph),” said Dr. Tim Doggett, principal scientist at AIR Worldwide. “The storm then weakened as it tracked across the Yucatan peninsula, re-emerging into the Bay of Campeche during the day on Wednesday. Back over water, Ernesto drew warm maritime air back into the system, which significantly increased the thunderstorm activity around the centre of circulation. As a result, maximum sustained winds increased to approximately 70 mph (strong tropical storm) and the minimum central pressure dropped to an estimated 993 mb.”

    “Ernesto tracked along the coast of southern Veracruz state before coming ashore just west of the port city of Coatzacoalcos around 1:00 PM CDT (18:00 UTC) on Thursday. Maximum sustained winds at second landfall were around 60 mph. The storm decayed rapidly as it moved over land and interacted with mountainous terrain of southern Mexico.”

    As of the National Hurricane Centre’s 4 AM CDT advisory today, Tropical Depression Ernesto had maximum sustained wind speeds of 35 mph and is located in southern Puebla. It is forecast to continue weakening and is expected to dissipate by early this afternoon over the state of Guerrero.

    Dr. Doggett continued, “The interaction of the storm with mountainous terrain in the interior of Mexico is producing heavy precipitation over much of central and southern portions of the country. As the remnants of Ernesto continue to track west, the storm continues to have the potential to cause heavy rainfall and flooding.”

    Some mountainous areas in the states of Veracruz, Tabasco, Puebla and Oaxaca could receive isolated rainfalls amounts of up to 15 inches. The city of Coatzacoalcos received more than seven inches of rain prior to Ernesto’s landfall, and San Pedro reported more than 10 inches, according to the Mexican weather service.

    According to AIR, in Mexico, insured residential properties are largely of confined masonry construction, while insured commercial properties are overwhelmingly of confined masonry and reinforced masonry. Against Ernesto’s reported wind speeds, both construction types should fare well. Indeed, minimal wind damage has been observed so far, although there are reports of roofs being blown off. These were most likely poorly constructed homes. Other structures may experience minor damage to roof and wall claddings.

    According to Veracruz officials, no major flooding has yet occurred on any of the state’s rivers and major tributaries, although minor landslides are reported to have blocked some roads, including two in the state of Puebla.

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    Hundreds of doctors in Spain vowed Tuesday to ignore a new law that requires them to deny treatment to illegal immigrants from September 1 as part of government deficit-reduction measures. 

    Under the controversial measure foreigners living in the country without residency permits will be denied treatment at public hospitals and health centres unless they are under 18, pregnant, or in case of an accident or other medical emergency.

    Anger over the measure increased Tuesday after the government said it was working on a system that would allow illegal migrants who pay an annual fee to continue to receive care from the public health system.

    “My loyalty to patients does not allow me to ignore my ethical and professional duty and abandon them,” said a manifesto signed by 870 doctors and posted online. By signing the manifesto the doctors also registered as “conscientious objectors” against the law in a database launched in July by the Society of Family and Community Medicine, which represents 19,500 doctors.

    The new law “puts us in a situation where we have to stop treating people who were out patients, and that violates our deontological code,” the association said.

    Prime Minister Mariano Rajoy’s conservative government wants to cut Spain’s public deficit to less than three per cent of gross domestic product in 2014 from 8.9 per cent last year, the third-largest deficit in the Eurozone that year.

    It argues that restricting free health care to illegal immigrants and steps to curb “health tourism” by Europeans will save around one billion euros ($1.2 billion) per year. The health ministry said Tuesday it was working to create a system whereby non-Europeans in Spain could pay a fee to use the country’s public health system.

    The ministry did not say how much they would have to pay, but earlier Tuesday daily newspaper El Pais reported that those under 65 would have to pay 710 euros ($880) per year.

    Older people could be asked to pay up to 1,865 euros per year, it added.  “This affects the most vulnerable people, those who don’t have any residency papers,” said Vladimir Paspuel, who heads Ruminahui, a Spanish-Ecuadoran association that offers social and legal assistance to immigrants.

    “Many are not working or have very unsteady jobs. The little revenues that they have they use to survive.”

    Ruminahui was not against the proposal that illegal immigrants pay to use the public health system but the amounts being discussed in the media are too high, Paspuel said.

    “We also want to take part in efforts to get out of the crisis. But we need to arrive at a consensus so it does not affect the weakest people.”

    Four of Spain’s 17 regional governments — which are responsible for providing health and education services — have announced that they will continue to provide free health care to illegal immigrants. All of the regions — Andalucia, Asturias, Catalonia and the Basque Country — are run by parties other than the conservative Popular Party, which rules at the national level.

    The Socialist government of the Basque Country reiterated Tuesday its opposition to a health care system “based on cuts and restrictions”.

    Asked about the controversy over the new law, the Popular Party’s spokesman in congress, Rafael Hernando, said: “What illegal immigrants should do is enter Spain legally.”

    Spain “can no longer be a paradise for illegal immigration”, he added.

    Madrid, Aug 7, 2012 (AFP)

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    Standard & Poor’s Ratings Services affirmed its long-term counterparty credit and insurer financial strength ratings on Bahrain-based Trust International Insurance & Reinsurance Co. B.S.C.(c) Trust Re (Trust Re). The ratings were then withdrawn at the issuer’s request. The outlook was stable at the time of the withdrawal.

    At the time of the ratings withdrawal, the ratings on Trust Re reflected our view of the company as the core operating entity of Trust Re Group (the group). Supporting factors included the group’s strong operating performance, good capitalization, and good competitive position. Its high investment risk tolerance partially offset these positive factors.

    For 2011, in line with our expectation, the group posted a strong net combined ratio of 96% and an 8% return on equity, reflecting its selective underwriting process. (Lower combined ratios indicate better profitability. A combined ratio of greater than 100% signifies an underwriting loss.) The group’s performance compares well with that of most of its regional peers. Unlike Trust Re, its peers were affected by the record catastrophe losses in 2011.

    In line with our expectation, the group reduced risk in its investment profile by reducing its holdings in equities and real estate. At the end of June 2012, equities and real estate accounted for 16% (2011: 22%) and 6% (2011: 17%), respectively. The remainder of the portfolio comprised bonds (13%) and cash (65%). While we view this change in investment strategy positively, we consider Trust Re’s current investment risk tolerance to be high compared with non-life insurance industry norms.

    Because of the retained earnings and the reduction in investment risk, the group’s risk-based capital, measured using our model, improved to the upper end of ‘BBB’ level. It had deteriorated slightly at year-end 2011 because of growth in premium and reserve risks relative to its capital.

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    Hong Kong choked under the worst smog ever recorded in the city Thursday, with residents warned to stay indoors, away from the blanket of toxic haze, officials said. 

    Air pollutant readings broke records going back to 1999, except for levels reached when a natural dust storm hit the southern Chinese territory two years ago, environmental protection department spokesman Y.F. Chau said.  “This is the worst air pollution reading we’ve seen since Hong Kong started recording air pollution in 1999, except for the dust storm,” he said.

    Hong Kong’s famous skyline was shrouded in a dense blanket of toxic smog and the sky looked grey, although the weather was fine and sunny.

    “People with heart or respiratory illnesses, the elderly and children should reduce physical exertion and outdoor activities,” a government spokeswoman said.

    Officials said the pollution had been exacerbated by the influence of Typhoon Saola, which killed four people as it lashed Taiwan some 700 kilometres (450 miles) to the east.  The storm’s outer high-pressure air mass blanketed Hong Kong, bringing strong sunshine and high temperatures that pushed up ozone levels.  The pollution was particularly bad in the Central district of downtown Hong Kong, where luxury retail brands and multinational companies pay among the highest rents in the world.  Anti-pollution activists said Hong Kong could not keep blaming the weather or factories in neighbouring mainland China for its recurring pollution problems.  “If Hong Kong did not produce air pollutants, the weather conditions would not be able to exacerbate or cause further consequences,” Clean Air Network campaign manager Erica Chan told AFP.  Emissions from local vehicles using old and dirty engines are among the main contributors to Hong Kong’s air pollution, she said.  The network said monitoring stations in the bustling shopping district of Causeway Bay on Wednesday recorded levels of the most dangerous fine particles that were three times higher than World Health Organization (WHO) guidelines.  The government announced revisions to its air quality objectives for the first time in 25 years in January, after University of Hong Kong research showed pollution-related illnesses killed more than 3,000 residents a year.  The new objectives impose more stringent limits on the atmospheric concentration for seven pollutants including sulfur dioxide, nitrogen dioxide, carbon monoxide and lead.  For the first time the city has started measuring airborne particles smaller than 2.5 micrometres in diameter, known as PM2.5, which are more harmful than the larger particles.  Heavy polluting vehicles will be phased out, hybrid or electric vehicles will be promoted and more use will be made of natural gas.  But independent analysts say the measures are too little, too late, and fall short of WHO guidelines.

    Hong Kong, Aug 2, 2012 (AFP)

    0 1

    Societe Generale and AXA announce the signing of their first Euro Private Placement for Sonepar within the context of the partnership between the bank and AXA.

    Sonepar is an independent family-owned French company with a global market leadership in Business to Business distribution of electrical products and related solutions. It is the first French company to benefit from this new type of disintermediated financing.

    Two months after the launch of the partnership, this transaction illustrates Societe Generale and AXA’s capability to complete a disintermediated financing deal for corporates. By combining the close relationships a bank has with its clients with the expertise of an institutional investor, this transaction is a major step in the emergence of this new type of financing as well as demonstrating the efficient cooperation between Societe Generale and AXA.

    0 0

    BlackRock announced the addition of Roland Arnold as co-manager of the BlackRock UK Special Situations Fund with effect from 1 August 2012, alongside existing manager, Richard Plackett.

    Roland joined BlackRock 12 years ago and has considerable experience of managing UK equity portfolios. The Fund is one of the BlackRock UK Equity Team’s flagship offerings, with assets under management of over £1.4bn. The Fund has been run by Richard Plackett since 31 May 2004 and during that time the team has produced a return of 138.6% compared to a return of 71.3% from the average fund in the UK All Companies sector.

    Roland has been working closely with Richard, head of the UK Small and Mid Cap Equity team, for the past 10 years and assisting him on the Fund for the past two years. Roland’s appointment is a formal recognition of the current process and a reflection of the strong conviction we have in him as an investor. Richard will continue to carry out a lead role on the management of the Fund retaining ultimate discretion over the portfolio

    We believe the additional management resource Roland brings as co-manager, both in terms of stock selection and helping to serve our clients’ requirements, will continue to benefit the strong long term track record of the Fund for our unit holders.

    When Richard Plackett assumed management of the Fund in 2004, the assets under management (AUM) were £100 million. They have grown significantly under his tenure and now stand at £1.4bn. This extra resource will enable Richard and Roland to continue servicing the ever growing client base and continue to focus on stock selection.

    The UK Small and Mid Cap Equity team, led by Richard Plackett, comprises five portfolio managers all of whom conduct research and contribute investment ideas.

    Richard Plackett, Head of the UK Small and Mid Cap Equity team at BlackRock said: “Having worked closely with Roland for 10 years he was the natural choice to join me in co-managing the BlackRock UK Special Situations Fund.  The Fund has grown significantly over the last 8 years and the additional management resource Roland will provide will help to continue serving our growing client base. We enjoy debating our investment decisions and I am pleased to provide our clients with access to Roland’s long track record in managing small and mid cap equities. “

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