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Sofia Ashmore

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The pension provider Delta Lloyd is offering the First Year’s Budget to employers from 1 October. The First Year’s Budget meets the costs which employers incur when they take out a pension plan.

Employers can use this as a reduction in the costs of the pension plan or can offset it against the extra man hours put in by pension advisers when setting up the insurance. In addition to the introduction of the First Year’s Budget Delta Lloyd is adjusting the level of the pension provision for the Personal Pension Plan.

The experience of pension advisers and surveys shows that many employers need some means of offsetting the costs which they incur when they conclude a pension contract. The lion’s share of the costs of a pension plan is incurred in the start-up period. The Resolution on the Monitoring of Conduct of Financial Companies (BGFO, in Dutch) states that sales-related commissions are no longer permitted since the start of this year. With budgets in free-fall, Delta Lloyd is taking employers’ needs on board by introducing a First Year’s Budget.

What’s included in the First Year’s Budget?
The First Year’s Budget is based on the annual premium under the contract. The First Year’s Budget only applies to the setting up of the pension contract. It applies both to new contracts and to contracts that have been extended by a minimum contract period of five years based on a premium volume of €10,000.

Why have a First Year’s Budget?
Despite the fact that 55% of employers consider a good pension provision to be the most important secondary condition of employment for their employees (after leave allowance), 25% would currently make direct savings on their employees’ pensions if they could do so*. So employers have an eye on affordability and want to have more insight into setting up pensions. Employers need clear communication when it comes to pensions. This is why it costs more time and money for employers to set up a good pension plan. The First Year’s Budget absorbs the initial costs when taking out pension insurance.

Why is the maximum provision for the Personal Pension Plan being adjusted?
In the interest of an available premium plan for the individual stakeholder, Delta Lloyd has reduced the maximum provision of the Personal Pension Plan. The current provision of the Personal Pension Plan is being maximised to 8% and a maximum of 50% of this can be converted to cash.

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Aon Benfield, the world’s reinsurance intermediary and capital advisor, today releases its 2009 analysis of the US Homeowners insurance market, which reveals that the global financial crisis and domestic regulatory practices are creating a challenging environment for insurers in the sector.

The report highlights that while insurers’ cost of capital has increased significantly over the past year – mainly as a result of the financial markets turmoil – their prospective return on equity (ROE) in Homeowners lines has decreased from 6.5 percent to 6.1 percent.

This is despite the fact that Homeowners insurers have paid out billions of dollars in claims in recent years as a result of catastrophic events.

Competition from state funds and inhibitive local regulation mean that the private insurance industry is facing continued and increasing difficulty in meeting its clients’ needs for coverage while providing adequate returns to investors.

The findings of the Aon Benfield report are based on an annual review of rate filings and supporting actuarial information.

Bryon Ehrhart, Chief Executive Officer of Aon Benfield Analytics, said: “To recover their increasing costs of capital, US Homeowners insurers continue to struggle through the labyrinth of state rate-making laws, process delays, regulations, consumer price protections and market disruptions from lightly financed and competitive state funds. They have lost ground in the past 12 months even though they have paid out billions of dollars in catastrophe claims to policyholders in recent years.”

Aon Benfield is advising US Homeowners insurers on how to optimize their use of capital, so they can provide their clients with continued protection against catastrophe risk.

In addition to offering the most appropriate risk transfer solutions, the company analyzes insurers’ direct and retained risk in order to provide guidance on pricing and underwriting.

Steve Hofmann, Executive Managing Director of Aon Benfield, said: “A complementary service to our risk transfer capabilities is to provide clients with guidance regarding all costs of catastrophe risk – including expected losses, reinsurance, cost of capital, and assessment risk due to state-run residual markets.  This information is integrated by our clients into rate filings, and also into underwriting and pricing at all levels of detail including state, territory, and individual risks.”

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    Nine out of ten businesses offer life assurance as part of their benefits package, yet over half of workers don’t think it is provided to them as an employee benefit, according to research by Aon Consulting, the leading employee risk and benefits management firm.

    Aon is urging employers to ensure that workers value this important benefit, and to review their rates to ensure they are getting the best value cover.

    The research found that 95%* of companies offer some level of group life assurance to their employees. Of this 95%, 69% of companies offer cover to all employees, with 25% offering it to some employees, and a further 1% awarding it to employees on a paid basis. Meanwhile, just over half of employees (54%**) said they thought life assurance was not provided to them.

    This significant gap between employee awareness and reality shows that businesses are missing a trick by failing to communicate the true value of benefits packages at a time when they are more important than ever in the war for talent.

    As a result, some employees are potentially duplicating their cover by purchasing life insurance that is already provided by their employer, whilst others have insufficient cover.

    Life assurance provided through employer-sponsored arrangements is invariably cheaper than the cover available to individuals and it can be offered with far less evidence of health requirements.

    Commenting on the findings, Paul White, head of risk benefits at Aon Consulting, said: “This research highlights the communications gap around life assurance and employee benefits in general.

    “In the current climate, a significant number of employers have frozen or even reduced salaries, meaning that the benefits they offer assume even greater importance in the overall remuneration package for employees.

    “There is a genuine opportunity for businesses to stress that they give their workforce much more than what is in their pay packet. Life assurance is an essential benefit that provides a degree of financial security in the event of death. Whilst employer-provided cover may not be at the right level to meet all employees’ needs, it does offer some level of protection.

    “It continues to be one of the most popular benefits offered by employers and, in the corporate arena at least, remains incredibly cheap to provide. The insurance market for group life cover currently puts market share above profitability, which means employers can continue to provide this benefit at comparable costs to a decade ago. However, there is no guarantee that this situation will continue.

    “We would urge employers who have not reviewed their rates recently to do so whilst current favourable conditions prevail, and also to ensure employees value this important benefit.”

    Note:

    * Aon Consulting Employee Benefits and Trends Report 2009
    The 2009 UK Benefits and Trends Survey offers insight into what employers are doing now and what actions they plan to take in the future on DC pensions, health and risk benefits and flexible benefits. The 2009 survey polled 650 employers on various issues relating to employee benefits and pensions.

    ** Aon Consulting Omnibus Survey 2009

    Aon’s Employee Omnibus Survey polled 4046 working adults from a range of industries on a range of topics around employee benefits and pensions.

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    Willis Group Holdings, the global insurance broker, today said that it has initiated a search for a new chief financial officer to replace CFO and Group Chief Operating Officer Patrick C. Regan in early 2010. Mr. Regan will remain at Willis through the year-end reporting and regulatory filing process for 2009, as well as to assist with the search for a successor and ensure a seamless transition, before joining Aviva , the world’s fifth largest insurance group, as CFO.

    Willis has retained Spencer Stuart, one of the world’s leading executive search consulting firms, to assist with the recruitment process.

    Joseph J. Plumeri, the Chairman and CEO of Willis, said: “In the past four years, Pat has contributed greatly to our efforts to grow Willis’ business and strengthen our financial and operating performance. We appreciate Pat’s many contributions to our company, as well as his commitment to remain fully engaged at Willis through our 2009 year-end reporting and regulatory filing process. We congratulate Pat and wish him well on the exciting opportunity he is taking with Aviva. Meanwhile, we are moving quickly to identify the best possible candidate to succeed Pat and help take Willis to the next level.”

    Mr. Regan said: “It has been a privilege to be a part of Willis’ outstanding management team, which has helped cement Willis’ position as the most client-focused global brokerage in the industry. As I embark on the next stage of my career, I am confident that under Joe Plumeri’s leadership and with the breadth and depth of the senior executive team behind him, Willis will continue to thrive and grow.”

    Mr. Regan joined Willis as an Executive Officer in January 2006. He has been CFO since March 2006 and Group COO since 2008.

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    Lloyd’s of London insurer Brit reported stronger nine-month sales and investment returns, and said insurance prices in the British market were set to keep rising.

    London-listed Brit said it had gross written premiums of 1.3 billion pounds for the nine months to September 30, an increase of 4.7 percent at constant exchange rates compared with the same period last year.

    The company, which in March announced plans to relocate to the Netherlands for tax purposes, said the improvement partly reflected a 4.8 percent rise in policy renewal prices, and predicted more price gains in the UK.

    “The direction of the UK market is more clearly positive with further rate improvement undoubtedly required to address certain areas of inadequate pricing,” Brit Chief Executive Dane Douetil said.

    Brit also benefited from a better investment performance, with total returns on its portfolio of 3.6 percent, compared with a loss of 0.4 percent a year earlier.

    However, the company warned investment returns would be “muted” next year, blaming low yield levels on government debt and narrower credit spreads.

    Brit shares were up 1.7 percent at 212.1 pence by 9:54 a.m., while the FTSE 250 share index was 0.6 percent higher.

    “The investment return has been good. It all points towards decent growth,” said Noble Securities analyst Rakshit Ranjan.

    Insurers were hit last year by a sharp fall in investment returns as the financial crisis weighed on equity and bond prices.

    But most are expected to confirm that a financial market recovery has fed through into a stronger investment performance when they issue third quarter trading statements over the next two weeks.

    With Reuters

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    Global banking giant HSBC said Thursday it had increased its holding in Bao Viet, Vietnam’s leading insurance and financial services group.

    “HSBC has signed an agreement to increase its shareholding in Bao Viet Holdings to 18 percent from 10 percent for 1.88 trillion Vietnamese dong
    (105.3 million US dollars),” the banking giant said in a statement.

    The group acquired a 10-percent stake in Bao Viet in 2007 but had an option to purchase another eight percent from Vietnam’s Ministry of Finance.

    “Our additional investment in Bao Viet reflects the successful partnership we have enjoyed over the last two years and the confidence we have in the long-term growth prospects of Bao Viet and of Vietnam,” said HSBC Chief Executive Michael Geoghegan in the statement.

    “This is also entirely consistent with our stated strategic focus on the world’s faster growing markets and our intention to meet the insurance and wealth protection needs of our customers in these rapidly developing markets.”

    HSBC announced in September that it would relocate Geohegan from London to Hong Kong, as the banking titan sought to underline its large presence in fast-growing emerging markets in Asia.

      1 12

      Zurich Financial Services said it had called in auditors KPMG to investigate after details of 51,000 British customers were lost at a data storage centre in South Africa.

      There is no sign so far the information has been misused by fraudsters, Zurich’s British subsidiary said on Thursday.

      KPMG is to investigate the incident and will also advise on strengthening Zurich’s data security procedures, the company said, adding it had informed the Financial Services Authority, Britain’s financial regulator.

      Annette Court, Zurich’s CEO for general insurance in Europe said: “We apologise to any customers affected by this unfortunate matter. We are putting a great deal of investment into strengthening our internal processes to ensure that incidents of this nature do not happen again in future.”

      British customers affected hold general insurance policies underwritten by Zurich. Details of an unspecified number of customers in South Africa and Botswana were also lost, the company said

      With Reuters

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        The country’s second-biggest insurer Aviva plans to cut costs and exploit growth opportunities by centralising all its continental European operations in a holding company in low-tax Ireland.

        As part of the plan, Aviva will also simplify the range of products it offers across 12 European businesses, and speed up new product launches, the company said in a statement on Thursday.

        The company said: “Aviva will make significant efficiency gains and build competitive advantage in the region,”.

        Aviva’s Europe chief executive Andrea Moneta said Ireland’s low corporate tax rate of 12.5 percent would cut the company’s overall tax bill, but stressed that the targeted efficiency gains did not depend on tax reductions.

        “The programme is going to deliver a set of improvements in terms of revenues and costs, and there is also room for improvement in terms of the blended tax rate we have,” he said in an interview.

        “Our plan has very minimal reliance on tax advantages.”

        Aviva shares were 1.7 percent lower at 433 pence by 8:08 a.m. British time, while the FTSE 100 share index was down 1.3 percent.

        The 12 European businesses being integrated do not include Aviva’s domestic unit, nor its operations in the Benelux countries, where Aviva is in the process of floating its Delta Lloyd subsidiary on the stock market.

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        Aviva announces plans today for its European business (excluding the UK) to capitalise on the significant growth opportunities in the region. It is also announcing the integration of its businesses across Europe*. Andrew Moss, Aviva’s group chief executive, and Andrea Moneta, chief executive, Europe, will present plans to analysts and investors later today at a briefing hosted at Aviva’s corporate headquarters in London.

        Aviva’s European business is a major contributor to the group’s financial performance. In the first half of 2009 Aviva’s European business, including Delta Lloyd, contributed 50% of Aviva’s long term savings sales and 44% of IFRS operating profits.

        Aviva has a clear two part strategy to exploit the considerable opportunities in Europe. Firstly, Aviva and Delta Lloyd announced on 19 October 2009 that they have launched the Initial Public Offering of Delta Lloyd. This will enable Aviva to enhance the value and liquidity of its retained majority stake in Delta Lloyd.

        Secondly, Aviva has established a new pan-European management team and has started to integrate the operations of its 12 separate businesses across Europe* through a “Quantum Leap” transformation plan. Aviva will centralise its operations allowing it to build a pan-European approach to distribution, simplify its product range and shorten the time to launch new products to customers. By moving to a pan-European operating model Aviva will make significant efficiency gains and build competitive advantage in the region.

        As part of the transformation of its European business* Aviva has established a single holding company for its European operations in Ireland. It will convert a number of existing subsidiary businesses in the region to branch status, where it is appropriate to do so, and subject to regulatory approval. This will deliver economic, operational and regulatory benefits to Aviva, especially with the anticipated introduction of Solvency II.

        Europe offers significant growth opportunities for Aviva in both under-penetrated Western markets and developing markets in Eastern Europe. The region is one of the biggest and most attractive insurance markets in the world combining:

        • A significant pool of assets (Europe, excluding the UK, has personal financial assets of €40 trillion and life and pensions assets of €4 trillion);
        • Substantial demand for insurance products (Aviva estimates life and pensions and general insurance premiums in the next five years will total €4 trillion);
        • Attractive demographics among Europe’s 800 million strong population and;
        • A highly fragmented market in which the top 10 insurers by market share represent only 37% of the total market.

        At the presentation Andrea Moneta will set out how Aviva is uniquely positioned to take advantage of the considerable potential in the European insurance market. Aviva Europe* has a significant market share in most of the 12 markets it operates in and has a diverse product mix across long term savings and general insurance. Aviva also operates through a variety of distribution channels: it is Europe’s largest bancassurer with 46 banking relationships across the region and has a significant retail franchise with 9 million retail [1] customers and 18,000 financial advisors (of which 10,000 are in Aviva’s own network).

        Aviva’s European business is a major contributor to the group’s financial performance and plans to transform the business are already delivering financial benefits. On an underlying constant currency basis, Aviva’s cost base across Europe* has reduced from €606 million (H1 2008) to €578 million (H1 2009) and its underlying margin has grown from 3.7% to 3.8% (H1 2008 to H1 2009) despite the challenging economic environment. As a result of the plans announced today and the progress already made, the Aviva Europe business* expects to contribute fully to Aviva’s target to double IFRS total return earnings per share by 2012.

        Andrea Moneta, chief executive, Europe, commented: “Aviva is taking a quantum leap in Europe with one way of operating across the region. This will improve the quality of our products, drive efficiency and create significant value for Aviva’s customers and shareholders.”

        Highlights :

        Strong presence in a major market

        • Aviva has significant market share in Europe, operating in 15 European countries, covering 80% of the region’s GDP and new business premiums
        • Largest bancassurer and major retail1 franchise
        • Contributed 50% of Aviva’s long term savings sales and 44% of IFRS operating profits (H1 2009)

        European market offers significant growth potential

        • Region’s personal financial assets stand at €40 trillion
        • Favourable demographic trends among 800m population
        • €4 trillion of insurance premiums in next five years

        Clear strategy to exploit opportunities in Europe

        • Integrating operations of 12 separate businesses across Europe through “quantum leap” transformation plan
        • Creating pan-European distribution and simplifying products
        • Plans to establish a single European holding company and simplified structure

        Aviva Europe expects to contribute fully to group’s “One Aviva, twice the value” target

        • Already delivering financial benefits: underlying margin has grown from 3.7% to 3.8% (H1 2008 to H1 2009) despite the challenging economic environment
        • Aviva Europe expects to contribute fully to Aviva’s group target to double IFRS total return EPS by 2012

        * excluding Delta Lloyd

        [1] Retail refers to the sale of insurance products outside of the bancassurance channel through a direct sales force, IFAs, brokers or internet sales.

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        Nina Kukuskina has been appointed as integration director for Aon Poland.  Following the acquisition of the Progress companies, Kukuskina will be in charge of the integration process, and will report to Slawomir Bany, CEO for Poland.

        Kukuskina has worked in the Latvian insurance industry since the market was liberalised in 1991, first as a general representative for Russian aviation insurance company AFES in the Baltic countries, then setting up her own private brokerage with one of her colleagues, which was later bought by Aon in 2004, when she was appointed as the CEO for Aon Latvia.

        Aigars Milts has been appointed CEO for Aon Latvia.  Milts replaces Nina Kukuskina and will report to Giedrius Kazlauskas, the CEO for Aon Baltics.

        Milts has been with Aon since 2007, working as an AGCN director.  Milts also took part in the former Aon EMEA North East High Potential Programme.  With five years of experience as an insurance broker, both internationally and locally, Milts is set to develop Aon in Latvia and in the Baltic States.

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        The ABI has appointed Peter Jolly as Assistant Director, Consumers and Distribution Reform. Peter joins the ABI from Standard Life, where he was Head of Distribution Policy, and takes over from Alex Roy, who has left to take up a new post outside the insurance industry.

        Maggie Craig, the ABI’s Director of Life and Savings and Director of Consumer Strategy, said: “We are delighted to appoint an industry expert of Pete’s calibre to the ABI team. Pete has over 20 years experience of the industry with three major companies and has worked in sales, strategy and distribution. His appointment reflects the importance that the ABI, and the whole insurance industry, places on ensuring that consumers are at the heart of all we do.

        “A key part of Pete Jolly’s role will be to lead the ABI’s work on implementing the Retail Distribution Review, making sure that it succeeds in delivering high quality, appropriate advice to as wide a range of consumers as possible. Pete’s knowledge of the life industry will stand him in very good stead in taking this work forward, and in developing the ABI’s Consumer Strategy.”

        Peter Jolly said: “I’m very pleased to have been given this opportunity to take forward the ABI’s important work on improving customer experiences of insurance. It will be a challenging role, at a particularly challenging time for the whole financial services sector, and I look forward to using my experience in the best interests of the ABI’s member companies and, most importantly, their customers.”

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        Cooper Gay, the independent insurance and reinsurance broker, has announced the acquisition of the majority shareholding in Reinsurance.com.ar LLC, the Florida-based specialist reinsurance broker.

        Established in 2006 by Guillermo Pastore, and with offices in Miami and Buenos Aries, Reinsurance.com focuses on treaty and facultative reinsurance solutions, primarily for the Argentine market.  Mr Pastore has over 20 years’ experience in the Latin American reinsurance sector and was formerly COO of EW Blanch and Benfield Greig in Argentina.  Mr Pastore will continue as Chief Executive Officer and will drive expansion in support of Cooper Gay’s strategy for the region.

        Toby Esser, Cooper Gay’s Group Chief Executive said: “We have worked closely with Guillermo Pastore over the past two years, and have been impressed by the commitment, professionalism and drive of his entire team.  I am delighted that we have moved to a majority shareholding in the company, further enhancing our ability to support the reinsurance requirements of this fast growing region.”

        Steve Jackson, Managing Director of the Latin region commented: “Guillermo Pastore is a highly respected reinsurance specialist who has already established a strong and active presence in the Latin American market.  He will be a great asset to Cooper Gay.”

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        De-stocking throughout 2009 has fuelled UK exporters’ need for immediate cash on winning a contract and the new Guide to Financing Exports from the British Exporters Association (BExA) sets out the options for trade finance.

        Susan Ross, chair of BExA and director of Aon Trade Credit, the UK’s largest credit insurance broker, has edited this practical guide.

        Exporters can either finance a portfolio of debt or a single contract through the international arm of their clearing bank or a specialist trade finance bank. Over the last 12 months, however, banks have become more cautious, charging more and preferring certain business sectors and export destinations. They are reviewing their risks more regularly and taking a more rigorous approach to breaches of covenant as they operate within the regulatory framework of Basle II.

        The guide is helping exporters in this new financing climate by addressing:

        • how to write contracts to lessen the need for external finance;

        • the advantages and disadvantages of the various financing techniques;

        • the relevance of debt protection and credit insurance;

        • description of the terminology used; and

        • advice on medium term finance and leasing.

        Susan Ross, chair of BExA and director of Aon Trade Credit, said: BExA’s Guide to Financing Exports is part of a series that also looks at export credit insurance, letters of credit, bonds and retrieving goods back following non-payment.

        “Export finance uses a host of technical terms, which from the outside can seem quite complicated and daunting. In BExA’s view, it is quite simple and the guide seeks to cut out and clarify the jargon. Trade finance has the advantage that banks like it – by definition, debts are measurable and have a date when they should convert to cash. As such, trade finance is usually a more effective way of obtaining working capital finance than an overdraft. Plus trade finance grows and contracts along with the sales of the company.”

        Download the cashflow guide for UK exporters

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        Qatar is selling 379.2 million shares in Barclays (BARC.L), worth over 1.3 billion pounds, the second major Middle East investor set to make a big profit by selling down its stake this year.

        Qatar Holding, which will remain Barclays’ biggest shareholder, will exercise warrants for the same amount of shares. Barclays will receive 750 million pounds from the warrants, which have an exercise price of 197.775 pence.

        They were part of a controversial 5.8 billion pound fundraising by the bank last November.

        The shares are being sold by Credit Suisse via an accelerated bookbuild.

        with Reuters

        Qatar is selling 379.2 million shares in Barclays (BARC.L), worth over 1.3 billion pounds, the second major Middle East investor set to make a big profit by selling down its stake this year.Qatar Holding, which will remain Barclays’ biggest shareholder, will exercise warrants for the same amount of shares. Barclays will receive 750 million pounds from the warrants, which have an exercise price of 197.775 pence.

        They were part of a controversial 5.8 billion pound fundraising by the bank last November.

        The shares are being sold by Credit Suisse (CSGN.VX) via an accelerated bookbuild.

        By 8:15 a.m. British time, Barclays shares were down 5.3 percent at 362 pence.

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        Marsh, the insurance broker and risk adviser, has appointed Peter Box, a former partner at PricewaterhouseCoopers, as a non-executive independent director on the firm’s UK board of directors. Mr Box, who retired from PwC on 30 June, will chair Marsh’s Audit Committee.

        Mr Box joins Marsh following a distinguished 39-year career at PwC, where he was an audit and business advisory partner to a broad range of companies, from large global groups to specialist national enterprises. In particular, through his focus on the insurance industry, Mr Box has developed an impressive understanding of the major issues affecting the sector, both in the UK and around the world.

        Martin South, Chief Executive Officer of Marsh in the UK, commented: “Peter’s exceptional market knowledge and international perspective, combined with his broad experience of regulatory and governance matters, will be of enormous benefit to Marsh. He will play a leading role in ensuring our governance structures, processes and risk framework are first class, while working closely with the UK management team to identify and capitalise on the extensive growth opportunities available to us.

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        Aviva is launching online secure services on Aviva for Advisers, the website built for financial advisers. The new system will save advisers time by making it quicker and easier for them to work with their customers.

        The site – launched on Monday 19 October – has been designed following extensive research among financial advisers and the improvements Aviva has made include:

        • Advisers can now see a personalised homepage with direct access to information about their new business pipeline, and saved quotes or new business applications – a first in the market.
        • They can navigate more easily to clients’ policies and Aviva products.
        • A new “My Clients” service provides a single view of 4 million clients’ bonds, pensions and protection policies.
        • An improved “Quote and apply” function makes it easier for advisers to do business online.

        Advisers should visit: www.aviva.co.uk/adviser

        Billy Burnside, head of e-business at Aviva, said: “Over the last 12 months we’ve been talking and listening to feedback from advisers to understand how they want to interact with us online. We’ve been building our business around advisers and we’ve totally transformed the secure services section of our site so that we’re giving advisers the online services and information they need.

        “We’re also launching new adverts that recognise the ‘Moments that matter’ to advisers in their professional lives. They highlight how important technology is to advisers – including Aviva for Advisers.”

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        Aviva has reduced market value reductions on with-profits policies. The changes apply to all Aviva unitised with-profit funds – formerly known as CGNU, CULAC, and NULAP funds – and come into effect on 19 October 2009.

        The average MVR rates applying to policies are:

        Year units bought

        Average MVR rate as at 01/07/09

        Average MVR rate as at 19/10/09

        1988

        5%

        2%

        1989

        14%

        12%

        1990

        6%

        4%

        1991

        0%

        0%

        1992

        1%

        1%

        1993

        1%

        1%

        1994

        2%

        1%

        1995

        1%

        1%

        1996

        3%

        2%

        1997

        8%

        5%

        1998

        15%

        12%

        1999

        16%

        14%

        2000

        20%

        18%

        2001

        11%

        10%

        2002

        2%

        1%

        2003

        1%

        0%

        2004

        2%

        1%

        2005

        9%

        6%

        2006

        16%

        13%

        2007

        18%

        16%

        2008

        9%

        8%

        Aviva follows a robust and comprehensive MVR review strategy and makes adjustments only when there is a sustained improvement in the overall value of the with-profit funds. The move to reduce MVRs follows improvements in the stock market experienced over the past six months. However, the stock market is still well below the last peak of October 2007*. This decision has been taken in line with Aviva’s commitment to prudent fund management and treating customers fairly.

        Some 86% of Aviva with-profits bond policyholders benefit from valuable guarantees.  This year 50% of bond policies are eligible for a guarantee and 33,000 will be able to take advantage of their 10 year anniversary No Market Value Reduction Guarantee.

        David Barral, marketing director at Aviva, said: “We have been monitoring MVR levels on a weekly basis and the sustained improvement in the overall value of the with-profit funds means we are pleased to reduce market value reduction (MVR) rates from 19 October 2009. Aviva’s with-profit funds continue to provide investors with attractive returns while protecting them from the extremes of volatile equity markets.”

        How an MVR works
        Suppose there are three investors in a with-profits fund, who each pay in £10,000, so the total with-profits fund is worth £30,000. Stock markets fall by 10% so that the total with-profits fund drops to £27,000. If one investor then withdraws his original £10,000, without introducing an MVR, this would leave only £17,000 in the fund to be shared between the remaining two investors. The investor who encashed his policy early would take more than his fair share of the fund.

        *Despite recent improvements, the stock market still remains below its peak in autumn 2007.

        Date FTSE 100 Notes
        12/10/07 6,731 Previous peak (FTSE 100 peak 6,930 on 31/12/1999)
        15/09/08 5,204 Lehman Brothers collapses
        21/10/08 4,230 Aviva announces MVRs for unitised funds
        03/03/09 3,512 FTSE 100 low point, 48% fall from 12 October 2007peak
        12/10/09 5,210 Improving market but 23% lower than 12 October 2007

        Aviva’s with-profit funds are invested in a wide range of asset types and so movements in the FTSE 100 are not necessarily representative of combined movements in the asset values within the fund.

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        Asking prices for homes in England and Wales rose on an annual basis for the first time in more than a year in October, property Web site Rightmove said on Monday, buoyed by a dearth of properties coming onto the market.

        Asking prices rose 0.2 percent on the year — the first annual rise since June 2008 — taking them to an average 230,184 pounds.

        On the month, asking prices rose 2.8 percent, the biggest increase since February 2008 and the largest for a month of October in six years, Rightmove said.

        Other recent surveys have also shown house prices are rising again on a monthly basis, but the trend has mostly been driven by a lack of supply as homeowners prefer to sit out the downturn rather than accept a lower price for their property.

        “Current price recovery is based on an unusually thin market with transaction levels still 54 percent down on 2007,” Rightmove said. “Ongoing lack of supply is driven by home owners deciding not to move given the current economic backdrop.”

        Rightmove said London led October’s gains, with prices up by 5.2 percent on the year and 6.5 percent on the month, taking the average asking price to a record high of 416,157 pounds.

        “Lack of fresh stock is the driving factor behind this record high,” Rightmove said.

        With Reuters

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        Mutual & Federal Insurance Co.’s board will vote in favor of a takeover offer from majority-owner Old Mutual PLC, the South African short-term insurer said Monday.

        London-based Old Mutual, which currently owns almost 74% of Mutual & Federal but will make an offer for the outstanding shares worth about GBP155 million, separately said it is progressing with its proposed acquisition.

        Mutual & Federal said based on the opinions of a board subcommittee and JP Morgan Chase Bank, “the board is of the opinion that the terms of the offer … are fair.”

        Old Mutual last week said it will issue new shares to increase its stake in Old Mutual to 100%.

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          Britain’s recovery from recession will be slow and painful, with growth unlikely to hit one percent in 2010, a report out Monday warned.

          The recovery will be a drawn out, bumpy ride, according the influential Independent Treasury Economic Model (ITEM) Club economic forecasting group of auditors Ernst and Young.

          The club said the emergence from recession would be hampered by world economic uncertainties, government tax increases and lending restrictions.

          “The outlook for the next 12 months is certainly looking more positive than the last year,” said Professor Peter Spencer, chief economist to the ITEM Club.

          “But it is going to be a bumpy ride, particularly once the government starts to cut back.

          “Policy will begin to tighten in early-2010 with the restoration of valued added tax to 17.5 percent; an end to the stamp duty holiday on housing; an increase in national insurance contributions; the introduction of the new 50 pence tax (50 percent upper tax rate) and a programme of spending restraint.

          “But these measures only provide a fraction of the extra income needed to close the government deficit.”

          The forecast sees an “anaemic” gross domestic product (GDP) performance next year following an uncertain recovery in the second half of this year.

          “GDP growth struggles to reach one percent in 2010,” the report said.

          “The weakness of domestic demand puts downward pressure on the Consumer Price Index, but this is offset by downward pressure on the exchange rate, helping to rebalance the economy in subsequent years.”

          The ITEM Club forecast comes ahead of Friday’s official figures for July to September, which are expected to show that Britain’s worst recession in decades has finally ended, with a quarter of positive GDP.

          Britain’s recession began in the second quarter of 2008.

          “We have come a long way since this time last year,” Spencer said.

          “But with consumers repaying debt and fiscal policy inevitably tightening in the UK… it is difficult to see any serious potential for a sustained recovery in domestic demand.

          “There could still be substantial pain to come for corporates and consumers. For a sustainable recovery the UK economy needs world trade to pick up and there is still not much sign of that happening.”

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