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International Private Medical Insurance Magazine (iPMIM) is the ultimate Health and Medical Insurance Digital Media serving expatriate, corporate, health and travel insurance markets. Due to the nomadic nature of the international healthcare industry iPMI Magazine is an internet based news service, for worldwide healthcare professionals, who need to understand the impacts of healthcare and insurance policy, regulatory, and legislative developments. Combined with in depth health insurance industry analysis, best-in-class health insurance industry data, and exclusive, C-Suite Executive health insurance interviews and round tables, iPMI Magazine bridges an information gap between healthcare payor, provider and patient. Written by the health and medical insurance industry, for the health and medical insurance industry, iPMIM is supported and designed by leading international medical insurance companies and service providers.

Website URL: http://ipmimagazine.com

Underinsured Rate Rose From 2014-2018, With Greatest Growth Among People in Employer Health Plans

People who are “underinsured” have high health plan deductibles and out-of-pocket medical expenses relative to their income and are more likely to struggle paying medical bills or to skip care because of cost. Among adults who were insured all year, 29 percent were underinsured in 2018, up from 23 percent in 2014, according to results from the Commonwealth’s Fund’s latest Biennial Health Insurance Survey 

The survey offers a big-picture look at Americans’ health insurance, including the quality of their coverage, in 2018. It finds that:

  • More U.S. adults are underinsured compared to 2014, with the largest growth among people with job-based health plans. Twenty-eight percent of U.S. adults who have health insurance through their employer were underinsured in 2018, up from 20 percent just four years earlier. At the same time, people who bought plans on their own through the individual market or the marketplaces were the most likely to be underinsured, with 42 percent reporting a lack of adequate coverage in 2018.
 
  • Underinsured adults report having trouble affording their care:
    • Problems getting care: 41 percent of underinsured adults said they delayed needed care because of cost, compared to 23 percent of people with adequate insurance coverage.
    • Difficulty paying medical bills: Almost half (47%) of underinsured adults report medical bill and debt problems –nearly twice the rate as those who are not underinsured (25%).
       
  • Since the Affordable Care Act (ACA) became law, fewer adults lack insurance, but gains have stalled. Despite changes by the Trump administration and Congress that were expected to weaken the ACA, this survey finds no change in the adult uninsured rate between 2016 and the second half of 2018. By late fall of 2018, 12.4 percent of adults were uninsured, down from a high of 20 percent in the Commonwealth Fund’s 2010 survey, conducted the year the ACA became law.
    • Gaps in people’s coverage are shorter. The share of people who are insured but who experienced a period without coverage in the past year has not changed since 2010. However, these coverage gaps have become significantly shorter on average than they were before the ACA’s major coverage expansions.
      • In 2018, 61 percent of people who reported a gap said they had been without coverage for less than six months, compared to 31 percent who had been uninsured for a year or longer. This is nearly the reverse of the situation in 2012, when 57 percent were uninsured for a year or longer, and just one-third reported having a shorter coverage gap.
      • There has been some improvement in the prevalence of very long gaps – 2 years or more – in insurance coverage. Among adults who were uninsured at the time of the survey, 54 percent reported that they had been without coverage for two years or longer, down from 72 percent before the ACA coverage expansions went into effect.
  • Adults with continuous insurance coverage, including people who are underinsured, get preventive care and cancer screenings at higher rates than those without it. Having continuous coverage – even coverage that does not provide adequate cost protection – makes a significant difference in people’s access to care. The majority of adults insured all year report a regular source of care, get timely preventive care, and receive recommended cancer screenings.

    This better access stems in part from the ACA’s requirement that insurers and employers cover recommended preventive care and cancer tests without cost-sharing.
    • Access to care: 93 percent of adults with continuous full coverage and 94 percent of adults who were underinsured for all of 2018 had a regular source of care.
    • Cancer screenings: 71 percent of women ages 40 to 64 who were continuously insured, including those who were underinsured, received mammograms.

IMPLICATIONS

Both the federal government and states could extend the law’s coverage gains and improve the cost protections of both individual market and employer plans, the Commonwealth Fund report finds. A short list of policy options that they could pursue includes:

  • Improving Premium Affordability and Increasing Coverage
    • Expanding Medicaid in all states without restrictions.
    • Placing limits on short-term health plans and other insurance options that do not comply with the ACA.
    • Reestablishing outreach and navigator funding for the 2020 open-enrollment period to help people enroll in marketplace plans.
    • Lifting the 400 percent-of-poverty cap on eligibility for marketplace tax credits so more families can afford marketplace plans.
    • Making premium contributions for individual market plans tax deductible.
    • Fixing the so-called family coverage glitch, which has left many families with high-cost employer plans ineligible for marketplace subsidies. That’s because under the ACA, affordability and access to subsidies are based on a plan for a single employee instead of the higher-cost family plan.
  • Establishing State or Federal Reinsurance Programs to Lower Marketplace Premiums
    • After the ACA’s reinsurance program expired in 2017, several states implemented their own programs – including Alaska, which reduced premiums by 20 percent in 2018. These lower costs particularly help people whose incomes are too high to qualify for ACA premium tax credits. More states are seeking federal approval to run programs in their states, and several congressional bills have proposed a federal reinsurance program.
  • Improving the Cost Protection of Individual Market and Employer Plans
    • Offering cost-sharing-reduction subsidies to more of the people who currently earn too much to qualify for them.
    • Providing refundable tax credits to offset high out-of-pocket costs.
    • Excluding more health services from plan deductibles in all health plans.
    • Increasing the required minimum value of employer plans.

In addition to these options, policymakers must address rising health care costs, the authors note. Doing so will be critical for keeping down employer premiums and deductibles.

Flybmi Announces That It Has Ceased Operations And Is Filing For Administration

British Midland Regional Limited, the UK East Midlands-based airline which operates as flybmi, has today announced that it has ceased operations and is filing for administration.

  • Flights operated by flybmi served Aberdeen, Bristol, Brno, City of Derry, Dusseldorf, East Midlands, Esbjerg, Frankfurt, Hamburg, Jonkoping, Karlstad, London Stansted, Lublin, Milan Bergamo, Munich, Newcastle, Norrkoping, Nuremburg, Oslo, Paris Charles de Gaulle, Rostock/Laage, Saarbrucken and Stavanger.

  • The airline carried 522,000 passengers on 29,000 flights in 2018.

  • Customers with bookings should contact their bank or payment card issuer to initiate the process of obtaining a refund. If Customers have booked through Lufthansa, Brussels Airlines or another airline or code partner or a booking agent Customers should contact them directly. Customers who have travel insurance should contact their travel insurance provider to understand if they are eligible to claim for cancelled flights and the procedure for doing so.

  • Flybmi flights operated under codeshare agreements with code partners Lufthansa, Brussels Airlines, Turkish Airlines, Loganair, Air France and Air Dolomiti.

Flybmi operates 17 regional jet aircraft on routes to 25 European cities.

All flights have been cancelled with effect from today. Customers who booked directly with flybmi should contact their payment card issuer to obtain a refund for flights which have not yet taken place. Customers who have booked flybmi flights via a travel agent or one of flybmi’s codeshare partner airlines are recommended to contact their agent or airline for details of options available to them. Customers who have travel insurance should contact their travel insurance provider to find out if they are eligible to claim for cancelled flights and the procedure for doing so.

A spokesperson for flybmi said:

“It is with a heavy heart that we have made this unavoidable announcement today. The airline has faced several difficulties, including recent spikes in fuel and carbon costs, the latter arising from the EU’s recent decision to exclude UK airlines from full participation in the Emissions Trading Scheme. These issues have undermined efforts to move the airline into profit. Current trading and future prospects have also been seriously affected by the uncertainty created by the Brexit process, which has led to our inability to secure valuable flying contracts in Europe and lack of confidence around bmi’s ability to continue flying between destinations in Europe. Additionally, our situation mirrors wider difficulties in the regional airline industry which have been well documented.

“Against this background, it has become impossible for the airline’s shareholders to continue their extensive programme of funding into the business, despite investment totalling over £40m in the last six years. We sincerely regret that this course of action has become the only option open to us, but the challenges, particularly those created by Brexit, have proven to be insurmountable.

“Our employees have worked extremely hard over the last few years and we would like to thank them for their dedication to the company, as well as all our loyal customers who have flown with us over the last 6 years.”

Bmi Regional employed a total of 376 employees based in the UK, Germany, Sweden and Belgium.

Information for Customers & Customer Questions and Answers

OVERVIEW

  • The Company is no longer able to operate any flights to and from the UK and within Europe.
  • ALL FLIGHTS HAVE BEEN CANCELLED WITH IMMEDIATE EFFECT BOTH FROM AND TO THE UK AND WITHIN EUROPE.
  • All Customers due to travel with the Company will need to rebook flights with an alternative airline.
  • Please DO NOT TRAVEL TO THE AIRPORT unless you have arranged an alternative flight with an alternative airline.
  • The Company is unable to arrange or reschedule any flights for you.
  • If Customers have booked through a code share partner of the Company (Lufthansa, Brussels Airlines, Turkish Airlines, Loganair, Air France and Air Dolomiti) or a booking agent you should contact them directly.

CUSTOMER ACTIONS

  • The following actions may be available to Customers in respect of any claim they may have relating to any booked flight that has not flown:
  • Credit Cards - Customers who have paid a deposit or paid for flights by credit or debit card and the flights have been cancelled may be able to claim a refund from their card issuer. Please contact your card issuer as soon as you can if this applies to you. Further information is available from the UK Cards Association: Credit and Debit Cards: a Consumer Guide www.theukcardsassociation.org.uk
  • Travel Insurance - Customers who have travel insurance should contact their travel insurance provider to understand if they are eligible to claim for cancelled flights and the procedure for doing so.
  • If Customers have booked through a code share partner of the Company (Lufthansa, Brussels Airlines, Turkish Airlines, Loganair, Air France and Air Dolimiti) or a booking agent you should contact them directly.
  • Please refer to the following Questions and Answers for further information.

I am due to fly tomorrow, what should I do?

  • Unfortunately all flights have been cancelled.
  • Do not go to the airport unless you have booked a flight with an alternative airline.
  • If Customers have booked through a code share partner or a booking agent you should contact them directly for assistance.
  • Our code share partners are Lufthansa, Brussels Airlines, Turkish Airlines, Loganair, Air France and Air Dolomiti.

As my flight has been cancelled who will help me to fly?

  • The Company is unable to reschedule or rebook alternative flights on behalf of Customers.
  • Customers will need to make alternative arrangements with a different airline.
  • If Customers have booked through a code share partner or a booking agent you should contact them directly for assistance.
  • Our code share partners are Lufthansa, Brussels Airlines, Turkish Airlines, Loganair, Air France and Air Dolomiti.

Who pays for my replacement fight?

  • The Company is unable to purchase alternative flights for Customers affected. Those affected will have to purchase replacement flights directly with a different airline.
  • If Customers have booked through a code share partner or a booking agent you should contact them directly.
  • Our code share partners are Lufthansa, Brussels Airlines, Turkish Airlines, Loganair, Air France and Air Dolomiti.

How do I get my money back for cancelled flights?

  • The Company is unable to repay Customers for cancelled flights which they have paid for.
  • There are a number of options available to Customers to consider:
    • Customers should contact their bank/credit card provider to obtain refunds.
    • If Customers have booked through a code share partner or a booking agent you should contact them directly (details above).
    • Customers who have travel insurance should contact their travel insurance provider to understand if they are eligible to claim as a result of the cancelled flights and the procedure for doing so.

Will the Company loan me money to get home or for replacement flights?

  • The Company is unable to loan Customers money to pay for replacement flights.

I have paid on my credit / debit card, what should I do?

  • If Customers have made a deposit for or paid for goods or services by credit or debit card and the goods or services are not going to be received by the due date, you may be able to get your money back by claiming a refund from your card issuer.
  • If you think this may apply to you, you should contact with your card issuer as soon as you can to understand what financial protection you may be entitled to.
  • Further information (including time limits that may apply) is available from the UK Cards Association Credit and Debit cards: A Consumer Guide www.the ukcardassociation.org.uk.
  • The contact number for your credit or debit card issuer is likely to be located on the reverse of your card (otherwise it can be found online). The card issuer is the bank which issued the card to you, not the payment processor. For example, if you have an Lloyds MasterCard, the card issuer is Lloyds (not MasterCard).
  • If you paid by credit card, you may have a claim against your credit card issuer under section 75 of the Consumer Credit Card Act 1974 for the cost of making alternative travel arrangements to return to the UK together with any additional costs reasonably incurred. Section 75 claims are only available in respect of individual flights which each cost over £100 at the time of purchase. However, please contact your credit card issuer for further details on eligibility, which costs may and may not be covered and how to make a claim.

I have had to pay for a hotel and food whilst I have been waiting to return to the UK, how do I get my money back?

  • As detailed above if you paid by credit card, you may have a claim against your credit card issuer under section 75 of the Consumer Credit Card Act 1974 for the cost of making alternative travel arrangements to return to the UK together with any additional costs reasonably incurred. Section 75 claims are only available in respect of individual flights which each cost over £100 at the time of purchase. However, please contact your credit card issuer for further details on eligibility, which costs may and may not be covered and how to make a claim.
  • Customers who have travel insurance should contact their travel insurance provider to understand if they are eligible to claim for cancelled flights and the procedure for doing so.
  • Customers may also have a claim for compensation under EU regulations 261/2004 (see below) for reasonable expenses.

What is EU Regulation 261/2004?

  • This regulation establishes the common rules on compensation and assistance to passengers in the event of denied boarding and of cancellation or long delay of certain flights within the EU.
  • If Customers have booked through a code share partner or a booking agent you should contact them directly regarding an alternative flight.
  • Our code share partners are Lufthansa, Brussels Airlines, Turkish Airlines, Loganair, Air France and Air Dolomiti.
  • If your flight has been cancelled you may have a statutory right to make a claim for compensation under this regulation.

I have already arranged holiday and annual leave with my employer and made accommodation bookings – what if I can’t find other flights? Will I be compensated for my costs?

  • If you have paid by credit card you may be able to claim these costs back. Please contact you card issuer regarding this.
  • Customers who have travel insurance should contact their travel insurance provider to understand if they are eligible to claim as a result of cancelled flights and the procedure for doing so.

Allianz Receives CBIRC Approval For Preparatory Establishment Of China’s First Fully-Owned Foreign Insurance Holding Company

  • Allianz receives first-ever approval by China Banking and Insurance Regulatory Commission (CBIRC) for preparatory establishment of foreign insurance holding company
  • 100%-owned insurance holding company enhances Allianz’s strategic flexibility to expand investment and growth in China
  • Approval follows Chinese government measures to further open up and encourage investment in China by foreign financial institutions
  • Development is testament to positive long-term China-Germany relationship and cooperation

November 2018 and Allianz announced that it has received approval from the China Banking and Insurance Regulatory Commission (CBIRC) for the preparatory establishment of an insurance holding company in China.  The company - Allianz (China) Insurance Holding Company Limited - will be China’s first-ever wholly-owned insurance holding company by a foreign insurer, and will be based in Shanghai. 

This holding structure will anchor Allianz Group’s long-term commitment to China by enhancing its strategic and financial flexibility to capture business opportunities and drive long-term success in the market.  When fully established, Allianz (China) Insurance Holding Company Limited will be strongly capitalized according to its application.

The regulatory approval follows a series of measures recently announced by the Chinese government to further open up and encourage investment in China by foreign financial insurance institutions.  This development follows the long-term positive bilateral relationship between China and Germany, and furthers its continued cooperation and collaboration. 

Oliver Bäte, Chairman and CEO, Allianz Group said, “Allianz is proud to be the first foreign insurer to commence the establishment of a holding company in China - a significant milestone for us to expand our presence in this strategic market.  Today’s announcement also follows the positive long-term cooperation between China and Germany, allowing our Chinese and international clients to be able to enjoy Allianz’s comprehensive financial and risk management solutions and services, and benefit from the continued growth and liberalization of China’s financial markets.”

George Sartorel, Regional CEO for Asia Pacific, Allianz, said, “China is central to our growth strategy for Asia, this development positions Allianz strongly to combine our global knowledge with deep insights into local consumer and industry needs. We look forward to contributing to the continued development and innovation of China’s fast-growing insurance sector, as well as to better serve Chinese customers and communities.

This marks the latest milestone for Allianz in China, a market it has served since the early 1910s. Today, with its 2,000 employees and affiliates in the country, Allianz offers the full spectrum of protection, risk management and asset management solutions and services in China. Allianz expects China to continue setting the pace for global insurance market growth, with premiums expected to rise 14 per cent per annum in the coming decade.

Allianz expects the holding company to be established in 2019, and will work on the necessary preparatory work under the guidance and assistance of the regulatory authorities. 

 

Allianz Delivers As Promised - Full Year and Quarterly Earnings Release 2018

  • Internal revenue growth of 6.1 percent in 2018
  • 2018 operating profit of 11.5 billion euros in the upper end of our 2018 target range
  • 2018 net income attributable to shareholders grew 9.7 percent to 7.5 billion euros
  • Solvency II capitalization ratio of 229 percent at end-2018, unchanged compared to end-2017
  • Board of Management proposes a dividend of 9 euros per share, up 12.5 percent
  • Renewal Agenda 1.0 successfully implemented
  • Operating profit target for 2019 is 11.5 billion euros, plus or minus 500 million euros, barring unforeseen events
  • 4Q 2018 internal revenue growth of 4.4 percent, 4Q 2018 operating profit up 0.4 percent to 2.8 billion euros; 4Q 2018 net income attributable to shareholders up 18.9 percent to 1.7 billion euros
  • New share buy-back program of up to 1.5 billion euros announced

Management Summary: Operating profit highest in Allianz’s history

Allianz Group had a successful year in 2018 meeting its performance targets in all segments and maintaining a high level of capital strength. The achievement of our Renewal Agenda objectives has laid the foundation for this very good performance. Based on preliminary figures internal revenue growth, which adjusts for currency and consolidation effects, amounted to 6.1 percent, and was supported by all operating business segments.

Total revenues grew 3.5 percent to 130.6 (2017: 126.1) billion euros. With the increase of 3.7 percent, the operating profit of 11.5 (11.1) billion euros is in the upper end of the Group’s announced target range of 10.6 to 11.6 billion euros and the highest in our history. Operating profit growth was mostly attributable to our Property-Casualty business segment, which reported a strong rise in operating profit of 13.3 percent. This was due to an improved expense ratio, lower claims from natural catastrophes, and premium growth. Our Asset Management business segment also saw an increase in operating profit due to a rise in assets under management (AuM) driven revenues. As a result of a lower investment margin amidst higher financial market volatility, our Life/Health business segment operating profit decreased.

Net income attributable to shareholders grew 9.7 percent to 7.5 (6.8) billion euros. An increased operating profit and lower income taxes more than offset the decline in our non-operating result.

Basic Earnings per Share (EPS) increased 14.4 percent to 17.43 (15.24) euros for the year 2018. Return on Equity (RoE) amounted to 13.2 percent (11.8 percent). The Solvency II capitalization ratio amounted to 229 percent at end-2018, unchanged compared to end-2017. The Board of Management will propose a dividend of 9 euros per share for 2018, up 12.5 percent compared to 2017.

Allianz continued to improve customer experience in 2018. 74 percent of businesses worldwide achieved a Net Promoter Score (NPS) above market average compared to 60 percent in the previous year. The Inclusive Meritocracy Index (IMIX), which measures leadership and performance culture, was at 71 percent in 2018, close to our target level of 72 percent. These measures reflect Allianz's efforts to serve customers and engage employees in the best possible way.

Allianz completed two share buy-back programs in 2018 with a total volume of 3.0 billion euros. All repurchased shares have been cancelled. A new share buy-back program of up to 1.5 billion euros has been announced on February 14, 2019.

“I am very proud of the global Allianz family for delivering such a great set of results. We reached the highest net income of the past ten years despite strong market volatility, especially in the fourth quarter,” said Oliver Bäte, Chief Executive Officer of Allianz SE. “Our customers continue to rely on us, and it’s with them in mind that we are focusing on simplicity in the next iteration of our strategy.”

In the fourth quarter of 2018, operating profit amounted to 2.8 (2.8) billion euros: a higher operating profit from our Property-Casualty business segment was mostly offset by a decline in our Life/Health and Asset Management business segments. The increase in the operating profit from our Property-Casualty business segment was mostly due to a higher investment result. Our Life/Health business segment operating profit declined mainly due to a lower technical margin in France. The decrease in operating profit from our Asset Management business segment was mostly driven by lower performance fees. Net income attributable to shareholders increased by 18.9 percent to 1.7 (1.4) billion euros in the fourth quarter of 2018 due to an improved non-operating result and lower income taxes.

“Allianz achieved excellent results in 2018 with operating profit of 11.5 billion euros, reaching the upper end of the Group’s announced target range of 10.6 to 11.6 billion euros,” said Giulio Terzariol, Chief Financial Officer of Allianz SE. “Our healthy and well-diversified business makes us confident that we will continue to deliver a strong financial performance again this year. The Group looks to generate an operating profit of 11.5 billion euros in 2019, plus or minus 500 million euros, barring unforeseen events.”

 

Property-Casualty insurance: Strong internal growth and good operating performance

  • Gross premiums written amounted to 53.6 (52.3) billion euros in 2018. Adjusted for foreign currency translation and consolidation effects, internal growth totaled 5.7 percent. Volume and price effects contributed 4.0 percent and 1.7 percent, respectively. For internal growth, AGCS, Germany, and Allianz Partners were the main growth drivers.
  • Operating profit increased by 13.3 percent to 5.7 billion euros in 2018 compared to the previous year. This increase was mainly due to a strong underwriting result, driven by a lower expense ratio, the absence of high severity losses from natural catastrophes, and to a lesser extent premium growth. Our operating investment result also contributed positively.
  • The combined ratio improved by 1.2 percentage points to 94.0 percent.

“I am pleased by our strong internal growth and our good operating performance in the Property and Casualty business segment,” said Giulio Terzariol. “We reached our goal of a 94 percent combined ratio by our consistently disciplined underwriting and moreover by a substantially improved expense ratio.”

In the fourth quarter of 2018, gross premiums written increased to 11.7 (11.3) billion euros. Adjusted for foreign currency translation and consolidation effects, internal growth amounted to 5.1 percent, with volume and price effects contributing 2.8 percent and 2.3 percent respectively. Operating profit increased by 14.0 percent to 1.5 billion euros compared to the same period of the prior year due to a higher investment and underwriting result. The combined ratio for the fourth quarter of 2018 improved by 0.4 percentage points to 94.1 percent.

 

Life and Health insurance: Continued profitable growth in new business

  • PVNBP1, the present value of new business premiums, increased to 58.5 (55.5) billion euros in 2018. This was mainly due to higher sales of capital-efficient products in the German life insurance business, in our business with fixed-indexed annuities in the United States, as well as in most lines of business in Italy.
  • The new-business margin (NBM) strengthened in 2018 to 3.6 (3.4) percent, supported by favorable market conditions. The value of new business (VNB) grew to 2.1 (1.9) billion euros in 2018, driven by the increase in sales and the continued shift to capital-efficient products.
  • Operating profit decreased to 4.2 (4.4) billion euros, the mid-point of our outlook range, which shows the resilience of our business amidst increased financial market volatility. The latter caused a decline of our investment margin through a combination of higher impairments, lower realizations and a decreased trading result in our German and U.S. life businesses.

“The continued growth in new business in the Life and Health business segment reflects the success of our products designed also for the low interest rate environment,” said Giulio Terzariol. “This shows that our customers want the quality and stability Allianz can offer.”

In the fourth quarter of 2018, PVNBP went up to 16.1 (15.2) billion euros, driven by the increased sales of fixed-indexed annuities in the United States. Operating profit decreased to 1.0 (1.1) billion euros, mainly due to a lower technical margin in France. NBM strengthened to 3.9 (3.6) percent, causing the VNB to increase to 631 (550) million euros.

1 PVNBP is shown after non-controlling interests, unless otherwise stated. 
 
  • Third-party assets under management (AuM) decreased by 12 billion euros to 1,436 billion euros compared to the end of 2017. Hereby, the positive effects from foreign currency translation were not able to compensate for the negative market effects, mainly attributable to the market downturn in the fourth quarter. Net outflows of 3 billion euros made a minor contribution to the decrease. Total assets under management were stable at 1,961 billion euros.
  • The cost-income ratio (CIR) rose by 0.5 percentage points to 62.4 percent in 2018. The ratio‘s rise was due to the inclusion of Allianz Capital Partners and investments in business growth.
  • Operating profit increased by 3.7 percent to 2.5 (2.4) billion euros. This was due to growth in operating revenues, mostly driven by higher average third-party AuM, and an increase in third-party AuM-driven margins, at both PIMCO and Allianz Global Investors. This positive development was only partly offset by increased expenses.

“Asset Management revenues and operating profit increased in a challenging environment in 2018,” said Giulio Terzariol. “Volatility in financial markets, especially in the fourth quarter, led to net outflows. However, the expansion of our margins clearly shows the good health of our business.”

In the fourth quarter of 2018, operating profit went down by 9.1 percent to 633 million euros, mostly due to lower performance fees and higher expenses. The cost-income ratio increased by 3.4 percentage points to 63.6 percent. Third-party AuM decreased by 51 billion euros: negative market effects of 40 billion euros and third-party net outflows of 31 billion euros could not be offset by favorable effects from foreign currency translation of 19 billion euros.

 

Aegon Reports 2nd Half 2018 Results

Net income declines to EUR 253 million reflecting unfavorable market movements and other charges

  • Underlying earnings decrease by 8% to EUR 1,010 million, as lower Retirement Plans earnings in the US more than offset business growth and higher margins in Europe, and expense savings
  • Fair value losses of EUR 257 million mainly driven by unfavorable market movements in the US, which are partly offset by positive real estate revaluations and hedging gains in the Netherlands and the UK
  • Other charges of EUR 581 million, mostly due to the previously announced legal settlement in the US and book loss on the divestment of the last block of US life reinsurance business as well as model & assumption changes in the Netherlands, and restructuring expenses
  • Return on equity increases to 10.2% resulting from lower taxes, in part due to US tax reform. Internal definition of adjusted shareholders’ equity changed to align closer with that of peers and rating agencies

Lower net deposits and new life sales; positive trend in external third-party asset management inflows

  • Net outflows of EUR 8.5 billion mainly due to outflows in the US Retirement Plans business. In full-year 2018, Asset Management achieved another year of positive external third-party net inflows
  • New life sales decline to EUR 398 million, impacted by lower indexed universal life and term life sales in the US. Lower new life sales in Asia due to reduced customer demand as short-term interest rates rose
  • Accident & health and property & casualty insurance sales down 56% to EUR 155 million, mostly as a result of the previously announced strategic decision to exit travel and stop loss insurance in the United States

Increasing dividend to shareholders based on strong capital position and normalized capital generation

  • Proposed final 2018 dividend per share of EUR 0.15; full year dividend increases by 2 cents compared with 2017
  • Solvency II ratio remains well above target range at 211% despite unfavorable market movements. Capital ratios of the main units remain at the upper end or above target zones
  • Capital generation in the units of EUR 39 million, including unfavorable market impacts of EUR 1,040 million and favorable one-time items of EUR 106 million
  • Holding excess cash remains within target range at EUR 1.3 billion
  • Gross financial leverage ratio improves by 160 basis points to 29.2% in the second half year 2018 following
    EUR 700 million deleveraging, and based on a more conservative internal definition of adjusted shareholders’ equity

Statement of Alex Wynaendts, CEO comments, “The second half of 2018 was challenging, as we experienced a significant decline in the markets towards the end of the year. This impacted the value of our customers’ investments, and thereby the results of our administration and services businesses. We have broad initiatives in place to provide additional, value-added services and drive sales growth in order to increase these results. Net income was also affected by previously announced transactions such as the divestment of the last block of life reinsurance in the United States.

“At the same time, we continue to simplify the organization, strengthen relationships with our customers and advisors, and enhance our service levels. This year’s extension of our partnership with Atos in the UK and the new partnership with TCS in the US allow us to modernize our administration systems, and provide faster and better propositions to our customers. I am also pleased that the service levels in our UK platform business returned to target levels following the actions we have taken. These are the actions that allow us to fulfil our purpose to help many more people achieve a lifetime of financial security, and puts us in a strong position to grow our business.

“In the second half of 2018, we successfully maintained a strong capital position despite adverse market movements and the impact of the previously announced settlement in the United States. Together with our confidence in our ability to grow capital generation in a sustainable way, this allows us to raise our full year dividend per share by 2 cents, an increase of 7% compared with 2017.”

Financial overview                                      
                                       
EUR millions 13   Notes   Second

half 2018

  Second

half 2017

  %   First

half 2018

  %  

Full Year
2018

 

Full Year
2017

  %  
                                       
Underlying earnings before tax   1                                  
Americas       614   728   (16)   602   2   1,216   1,381   (12)  
Europe       404   362   12   435   (7)   839   744   13  
Asia       23   26   (11)   31   (26)   55   49   12  
Asset Management       69   67   3   83   (17)   151   136   12  
Holding and other       (100)   (84)   (20)   (87)   (15)   (188)   (170)   (10)  
Underlying earnings before tax       1,010   1,099   (8)   1,064   (5)   2,074   2,140   (3)  
                                       
Fair value items       (257)   212   n.m.   (3)   n.m.   (260)   (61)   n.m.  
Realized gains / (losses) on investments       (10)   226   n.m.   (67)   85   (77)   413   n.m.  
Net impairments       (19)   (16)   (16)   -   n.m.   (19)   (15)   (24)  
Other income / (charges)       (581)   (365)   (59)   (294)   (97)   (875)   (68)   n.m.  
Run-off businesses       (7)   (11)   43   (7)   7   (14)   30   n.m.  
Income before tax       136   1,144   (88)   692   (80)   829   2,437   (66)  
Income tax       117   311   (62)   (201)   n.m.   (84)   (76)   (11)  
Net income / (loss)       253   1,454   (83)   491   (48)   744   2,361   (68)  
                                       
Net income / (loss) attributable to:                                      
Owners of Aegon N.V.       253   1,454   (83)   491   (48)   744   2,361   (69)  
Non-controlling interests       1   -   n.m.   -   73   1   -   n.m.  
                                       
Net underlying earnings       891   818   9   863   3   1,754   1,571   12  
                                       
Return on equity   4   10.2%   9.7%   6   10.1%   1   10.2%   9.3%   10  
                                       
Commissions and expenses       3,404   2,995   14   3,269   4   6,673   6,309   6  
of which operating expenses   9   1,923   1,893   2   1,863   3   3,786   3,878   (2)  
                                       
Gross deposits (on and off balance)   10                                  
Americas       18,387   16,420   12   19,892   (8)   38,279   38,543   (1)  
Europe       11,985   12,985   (8)   11,813   1   23,798   25,679   (7)  
Asia       51   100   (49)   76   (33)   128   222   (42)  
Asset Management       27,328   36,834   (26)   32,167   (15)   59,495   61,332   (3)  
Total gross deposits       57,751   66,339   (13)   63,949   (10)   121,700   125,776   (3)  
                                       
Net deposits (on and off balance)   10                                  
Americas       (7,594)   (27,255)   72   (7,139)   (6)   (14,734)   (29,713)   50  
Europe       (100)   3,246   n.m.   2,879   n.m.   2,779   5,921   (53)  
Asia       2   44   (96)   5   (66)   7   129   (95)  
Asset Management       (729)   10,681   n.m.   8,254   n.m.   7,526   6,913   9  
Total net deposits excluding run-off businesses       (8,421)   (13,285)   37   4,000   n.m.   (4,421)   (16,750)   74  
Run-off businesses       (126)   (98)   (29)   (109)   (16)   (234)   (338)   31  
Total net deposits / (outflows)       (8,547)   (13,382)   36   3,891   n.m.   (4,656)   (17,088)   73  
                                       
New life sales   2, 10                                  
Life single premiums       687   889   (23)   693   (1)   1,380   1,764   (22)  
Life recurring premiums annualized       329   338   (3)   353   (7)   682   720   (5)  
Total recurring plus 1/10 single       398   427   (7)   422   (6)   820   896   (9)  
                                       
New life sales   2,10                                  
Americas       208   221   (6)   212   (2)   420   472   (11)  
Europe       138   141   (2)   140   (1)   278   273   2  
Asia       52   65   (20)   70   (26)   122   151   (19)  
Total recurring plus 1/10 single       398   427   (7)   422   (6)   820   896   (9)  
                                       
New premium production accident and health insurance       95   303   (69)   213   (55)   308   776   (60)  
New premium production property & casualty insurance       60   52   15   61   (1)   121   109   11  
                                       
Market consistent value of new business   3   236   172   37   304   (22)   540   409   32  
                                       
Revenue-generating investments & Employee numbers                                      
        Dec. 31,   June 30,       Dec. 31,                  
        2018   2018   %   2017   %              
Revenue-generating investments (total)       804,341   824,543   (2)   817,447   (2)              
Investments general account       139,024   138,105   1   137,311   1              
Investments for account of policyholders       194,353   193,211   1   198,838   (2)              
Off balance sheet investments third parties       470,963   493,226   (5)   481,297   (2)              
                                       
Employees       26,543   25,867   3   28,318   (6)              
of which agents       6,793   6,511   4   6,689   2              
of which Aegon's share of employees in joint ventures and associates       6,854   6,451   6   6,497   6              
                               

Strategic highlights

  • Aegon Americas is well-positioned for growth as highlighted at the Analyst & Investor conference
  • Aegon Americas eliminates Variable Annuity captive leading to significant benefits to its capital position
  • Aegon extends partnership with Atos in the UK for administration services
  • Aegon and Banco Santander expand their successful partnership in Portugal
  • Seventh consecutive full year of external third-party net inflows at Aegon Asset Management

Aegon’s strategy

Aegon’s purpose – to help people achieve a lifetime of financial security – forms the basis of the company’s strategy. The central focus of the strategy is to further transform Aegon from a product-based to a customer needs-driven company. This means serving diverse and evolving needs across the customer life cycle; being a trusted partner for financial solutions that are relevant, simple, rewarding, and convenient; and developing long-term customer relationships by providing guidance and advice, and identifying additional financial security needs at every stage of customers’ lives.

Aegon is focused on reducing complexity, eliminating duplication and increasing automation in order to realize cost efficiencies, thereby enabling it to invest and become a more digitally enabled and customer-centric company. Furthermore, the company is dedicated to driving scale and establishing strong positions in its current markets, adhering to strict standards to ensure the efficient use of capital by all of its businesses. Four key strategic objectives that enable the company to execute its strategy are embedded in all of Aegon’s businesses: Optimized portfolio, Operational excellence, Customer loyalty and Empowered employees.

Americas

On December 6, 2018 Aegon hosted an Analyst & Investor conference specifically focused on the US business. During the conference, the management team of Aegon Americas highlighted to analysts and investors how the organization is well-positioned to capture market opportunities in the United States, and detailed broad actions to accelerate organic growth. These actions include improving the company's competitive position, attracting new customers, strengthening existing customer relationships and increasing customer retention.

As part of Aegon’s ongoing process to simplify the legal structure of its business, Aegon eliminated its Variable Annuity captive in the US in the second half of 2018. The rationale behind setting up the Variable Annuity captive in 2015 was the need to manage the volatility of the US RBC ratio as a consequence of misalignment between reserve movements and hedging within the existing variable annuity capital framework. Recently, the National Association of Insurance Commissioners (NAIC) proposed improvements to the existing variable annuity capital framework. These reduce the non-economic volatility of the RBC ratio, and for this reason the use of a variable annuity captive was no longer required. As a result of the merger of two legal entities, Aegon realized a one-time benefit to capital generation of approximately USD 1 billion in the second half of 2018. This benefit was offset by the impact of tax reform on the RBC ratio in the second half of 2018.

Europe

On September 11, 2018, Aegon closed the acquisition of Robidus, a leading Dutch income protection service provider. This transaction fits the company’s strategic objective to grow its fee-based businesses. Aegon acquired approximately 95% of the company with the remainder being retained by Robidus’ management team. Robidus continues to operate on a standalone basis under its own brand name. The acquisition was financed from holding excess cash.

In the United Kingdom, Aegon’s platform offering and omni-channel distribution strategy have established Aegon as the leading platform provider in the market with a personal and workplace pension, investment, and protection offering. In the second half of 2018, assets across Aegon UK’s platform business reached GBP 128 billion. The first half of 2018 saw the migration of two portfolios of the Cofunds business by moving GBP 57 billion of institutional assets to Aegon technology in March, followed by GBP 28 billion of retail assets in May. A program was established to address service issues associated with the retail migration. Core trading and service levels have now returned to target levels. The focus now is to continually improve the platform, further increasing functionality and ease of use.

The final phase of the Cofunds integration will take place in the first half of 2019 with the migration of assets related to Nationwide. To date, Aegon has realized GBP 40 million annualized expense savings from integrating the Cofunds business, a figure which will rise to GBP 60 million following the Nationwide integration.

The digitization of Aegon’s protection business in the United Kingdom in the first half of 2018 has made it simpler and quicker for advisers to apply for cover for their clients and has led to a significant uptick in business, with new protection customer numbers up 36% in 2018 compared with the previous year.

Aegon announced on November 20, 2018, that it had strengthened its existing partnership with Atos, signing a 15-year contract to service and administer its Existing Business (non-platform customers) in the United Kingdom. The extension of the partnership will further improve customer service for 1.4 million customers. Since 2016, Atos has successfully serviced and administered Aegon's 500,000 protection customers in the UK, and has an excellent understanding of Aegon's business, culture and ways of working. The agreement, to be effective as of mid-2019, is initially expected to lead to annual run-rate expense savings for Aegon of approximately GBP 10 million, growing to approximately GBP 30 million over time. Total transition and conversion charges are estimated to amount to approximately GBP 130 million, and are expected to be recorded over the first three years of the agreement.

Consistent with Aegon’s strategic objective to optimize its portfolio and capital allocation across its businesses, Aegon has successfully completed the sale of its businesses in the Czech Republic and Slovakia for EUR 155 million on January 8, 2019. This is a further step in rationalizing Aegon’s geographical footprint and focusing resources on Aegon’s key markets.

On December 21, 2018, Aegon expanded its partnership with Banco Santander in Portugal. The transaction with Banco Santander in Portugal comprises the life and non-life in-force books owned by Banco Popular within the scope of the partnership and generated by the Banco Popular franchise as well as other channels (mainly agents and brokers). In addition, it includes the life and non-life new business within the scope of business of the partnership distributed through the former Banco Popular franchise, which Banco Santander acquired in 2017. Aegon has paid an upfront consideration for the expansion of the partnership in Portugal of EUR 14 million and will pay an additional amount of up to EUR 6 million, depending on the performance of the partnership.

Asia

In India, Aegon Life launched a new guaranteed return insurance plan, called POS GRIP (Point of Sale Guaranteed Return Insurance Plan). The product is in line with Aegon’s philosophy of launching simple, easy to understand products. POS GRIP provides dual benefits of protection and savings. The benefit which a customer will receive at the end of the policy term is guaranteed and is stated up-front when buying the policy. The guaranteed additions accrue at the end of every year throughout the policy term and include a one-off loyalty booster payable at the end of the policy term.

In China, Aegon THTF launched an upgrade of its award-winning platform for agents that was unveiled in October last year. The platform features professional marketing, smart recruitment, and differentiated service, serving as the smart personal assistant to agents. Aegon THTF has been increasing investments into digitalization in pursuit of its digital development strategy.

Asset Management

Growing external third-party assets is an important element of the growth strategy of Aegon Asset Management. 2018 was the seventh consecutive full year of positive external third-party net inflows. This reflects Aegon Asset Management’s competitive performance, together with management’s ability to leverage scale and capabilities from the general account and third-party affiliate businesses.

The continued strong commercial momentum in the Netherlands was underlined by strong inflows into the Dutch Mortgage Funds, which grew to EUR 16 billion of assets under management in the second half of 2018.

Operational highlights

Underlying earnings before tax

Aegon’s underlying earnings before tax decreased by 8% compared with the second half of 2017 to EUR 1,010 million. Expense savings in all regions and higher earnings in Spain & Portugal, the Netherlands and the UK platform business from business growth and higher margins were more than offset by the divestment of UMG in the Netherlands, and lower Retirement Plans earnings and adverse claims experience in the United States.

Underlying earnings from the Americas decreased by 16% to EUR 614 million driven by lower Retirement Plans earnings and adverse claims experience, which more than offset expense savings. The second half year of 2018 included EUR 14 million unfavorable claims experience compared with EUR 62 million favorable claims experience over the same period last year. Unfavorable mortality experience in Life and Retirement Plans was partly offset by favorable claims experience in Accident & Health. Retirement Plans earnings decreased significantly, which was mainly driven by lower fee income from lower asset balances, a lower investment margin, and investments in operations and technology.

Underlying earnings before tax from Aegon’s operations in Europe increased by 12% to EUR 404 million. This was the result of growth in all regions, most notably in Spain & Portugal driven by better underwriting results, and expense savings. Furthermore, earnings growth was supported by a higher investment margin in the Netherlands from the shift to higher-yielding assets, lower funding costs for the bank and growth of the bank’s balance sheet, as well as growth of the Digital Solutions business in the United Kingdom. This was partly offset by the divestment of UMG in the Netherlands.

Aegon’s underlying earnings in Asia decreased by EUR 3 million to EUR 23 million driven by lower earnings from the joint-venture in China, as a result of investments in growth, and lower earnings from the direct marketing business, which is in run-off.

Underlying earnings before tax from Aegon Asset Management were up by 3% to EUR 69 million in the second half of 2018. This increase was a result of higher earnings in the Americas and in Europe driven by an increase in management fees and lower expenses, which were partly offset by lower performance fees from Aegon’s Chinese asset management joint venture Aegon Industrial Fund Management Company (AIFMC).

The result from the Holding declined by EUR 17 million to a loss of EUR 100 million, as a result of interest expenses on USD 800 million Tier 2 securities issued in April 2018 to replace perpetual securities. Interest expenses for these Tier 2 securities are taken through the P&L, while the interest expenses for the perpetuals were recognized directly through equity.

Net income

Net income declined to EUR 253 million in the second half of 2018, and mainly reflects fair value losses as a result of market movements, and an increase in Other charges.

Fair value items

The loss from fair value items amounted to EUR 257 million. Gains from fair value items in Europe, Asia and at the Holding totaled EUR 281 million, and mainly resulted from hedging gains in addition to real estate revaluations in the Netherlands. These were more than offset by losses in the United States of EUR 538 million largely from underperformance of alternative investments and the impact of declining equity markets on reserve movements net of hedging. The loss was higher than expected, mainly due to lower than anticipated gains as a result of the lack of implied volatility movements during the equity market decline.

Realized losses on investments

Realized losses on investments totaled EUR 10 million, as losses from the sale of US treasuries more than offset gains as a result of portfolio optimization in the United Kingdom.

Net impairments

Net impairments remained low at EUR 19 million and were driven by the impairment of corporate bonds resulting from a bankruptcy filing in the US.

Other charges

Other charges of EUR 581 million were mainly driven by a provision related to the earlier announced settlement of class action litigation with universal life policyholders and a book loss on the sale of life reinsurance business in the United States; model & assumption changes in the Netherlands; and restructuring expenses in the United Kingdom and United States.

In the United States, Other charges of EUR 310 million were largely the result of a provision of EUR 147 million related to the earlier announced settlement of class action litigation with universal life policyholders, a EUR 94 million book loss on the divestment of the last remaining substantial block of life reinsurance, transition and conversion charges of EUR 27 million related to the TCS partnership, and a EUR 26 million addition to a provision for unclaimed property. In January 2019, a court approved the aforementioned settlement with universal life policyholders. Over 99% of affected policyholders participated in the settlement. While less than 1% of policyholders opted out of the settlement, they represented approximately 43% of the value of the settlement fund. The settlement fund was reduced proportionally for opt outs, although Aegon continues to hold a provision for these policyholders.

In Europe, Other charges of EUR 230 million were caused by EUR 138 million charges from updated mortality and lapse assumptions in the Netherlands, EUR 35 million integration expenses for Cofunds and BlackRock’s defined contribution business, and EUR 19 million transition and conversion charges related to the agreement with Atos for administration services related to the Existing Business, both in the United Kingdom.

Other charges at the Holding amounted to EUR 36 million and were driven by IFRS 9 / 17 implementation expenses for the group.

Run-off businesses

The result from run-off businesses amounted to a loss of EUR 7 million, which was in line with expectations following the divestment of the majority of the remainder of these businesses in 2017.

Income tax

Income tax amounted to a benefit of EUR 117 million, while income before tax amounted to EUR 136 million. The income tax included one-time tax benefits of declining US and Dutch corporate income tax rates of EUR 84 million next to the regular tax exempt income items and tax credits. The effective tax rate on underlying earnings declined from 26% in the second half of 2017 to 12% in the second half of 2018, reflecting the reduction of the nominal corporate tax rate in the United States from 35% to 21%. The effective tax rate on underlying earnings is below the nominal tax rate as a result of tax exempt income and other tax benefits.

Return on equity

To align closer to definitions used by peers and rating agencies, Aegon has retrospectively changed its internal definition of adjusted shareholders’ equity used in calculating return on equity for the group, return on capital for its units, and the gross financial leverage ratio. As of the second half of 2018, shareholders’ equity will no longer be adjusted for the remeasurement of defined benefit plans. All figures in this press release, including comparatives, are based on the new definition, unless stated otherwise.

Return on equity increased by 50 basis points compared with the same period last year to 10.2% in the second half of 2018 under the current definition. Under the previous definition, return on equity would have been 9.3%. Lower underlying earnings were more than offset by a lower effective tax rate.

Operating expenses

Operating expenses increased by 2% to EUR 1,923 million as expense savings and the divestments of UMG and Aegon Ireland were more than offset by investments in growth in Banking and the Service business in the Netherlands, the acquisition of Robidus, restructuring charges, and IFRS 9 / 17 implementation expenses.

Aegon achieved its target to deliver EUR 350 million in annual run-rate expense savings by year-end 2018 as part of its plans to improve return on equity. Initiatives to reduce expenses have led to annual run-rate expense savings of EUR 355 million since the beginning of 2016. Transamerica achieved expense savings of USD 270 million over the last three years, which was below the USD 300 million target. A significant contributor to these savings was the partnership entered into with TCS earlier in 2018, which generated approximately one third of the total benefit achieved. However, investments within Retirement Plans drove staffing levels and related expenses higher than planned in the second half of 2018, as Transamerica aims to improve the Workplace experience and positions the business to accelerate growth. At a group level, that was compensated by additional expense savings in Dutch life and non-life insurance entities. Digitization of the business, automation of processes and efficiencies in the marketing and sales organization delivered EUR 79 million run-rate expense savings compared with the EUR 50 million targeted for the Netherlands. Expense savings at the Holding totaled EUR 19 million versus a target of EUR 15 million.

The abovementioned run-rate expense savings exclude the synergies from the Cofunds integration, which are expected to total GBP 60 million once completed, and the anticipated GBP 30 million savings from the extension of the partnership with Atos to administer the Existing Business in the United Kingdom.

Deposits and sales

Gross deposits decreased by 13% to EUR 58 billion driven by lower deposits on the platform in the United Kingdom and in Asset Management, while the prior period included EUR 6 billion of inflows from a single large mandate won by Aegon’s strategic partner La Banque Postale Asset Management (LBPAM). Gross deposits in the Americas increased by EUR 2 billion.

Net outflows amounted to EUR 8.5 billion for the second half, mainly driven by outflows in the United States of EUR 7.6 billion caused by contract discontinuances in Retirement Plans. These were caused by a limited number of large contract losses.

New life sales declined by 7% to EUR 398 million, as a result of lower term life and indexed universal life sales in the United States and lower sales in the Asian High-Net-Worth (HNW) businesses. The latter was impacted by higher cost of premium financing for customers as short-term interest rates rose.

New premium production for accident & health insurance decreased by 69% to EUR 95 million. This was predominantly driven by lower sales in the travel insurance, affinity and stop loss segments in the United States, and resulted from the previously announced strategic decision to exit these segments. New premium production for property & casualty insurance increased by 15% to EUR 60 million, driven by higher sales in Hungary.

Market consistent value of new business

Market consistent value of new business (MCVNB) increased by 37% to EUR 236 million driven by the Americas and Europe. The increase in MCVNB in the Americas mainly resulted from tax reform. In Europe, MCVNB almost doubled, driven by an enhanced sales mix in Spain & Portugal and improved margins on pension products on the UK platform.

Revenue-generating investments

Revenue-generating investments decreased by 2% during the second half of 2018 to EUR 804 billion. Net outflows and the impact of unfavorable equity market movements more than offset the inclusion of EUR 18 billion assets related to the acquisition of BlackRock’s defined contribution business in the United Kingdom.

Shareholders’ equity

Shareholders’ equity decreased by EUR 0.9 billion to EUR 19.5 billion on December 31, 2018, primarily driven by a lower revaluation reserve as a result of widening credit spreads in the United States. Shareholders’ equity excluding revaluation reserves decreased by EUR 0.4 billion to EUR 16.1 billion – or EUR 7.84 per common share – at the end of the second half 2018. This decrease was largely driven by the strengthening of the US dollar and net income, which were more than offset by dividends paid to shareholders and the impact of adverse market movements on defined benefit obligations.

Gross financial leverage ratio

As of the second half of 2018, Aegon retrospectively changed the definition of shareholders’ equity used in calculating the gross financial leverage ratio. The company will no longer adjust shareholders’ equity for the remeasurement of defined benefit plans to align its definition closer with those used by peers and rating agencies. Based on this more conservative calculation, the gross financial leverage ratio decreased by 160 basis points to 29.2% in the second half of 2018, which is within the 26 – 30% target range. This resulted from the redemption of EUR 200 million grandfathered Tier 1 securities in July 2018 and the maturity of EUR 500 million senior debt in August 2018. Under the previous definition, the gross financial leverage ratio would have been 27.0%.

Holding excess cash

Holding excess cash decreased from EUR 1,923 million to EUR 1,274 million during the second half of the year driven by EUR 700 million leverage reduction.

The group received EUR 786 million in remittances from subsidiaries, of which EUR 518 million from the United States, EUR 215 million from Europe, EUR 21 million from Asia and EUR 29 million from Asset Management. Capital injections of EUR 57 million in Asset Management, Central & Eastern Europe, Spain & Portugal and Asia were primarily related to investments in business growth.

The acquisition of Robidus led to a cash outflow of EUR 97 million. Furthermore, EUR 410 million cash was deployed for capital return to shareholders in the form of the cash portion of the interim 2018 dividend and the share buybacks to neutralize the final 2017 and interim 2018 stock dividends. The remaining cash outflows of EUR 171 million mainly related to holding funding and operating expenses.

Capital generation

Capital generation of the operating units amounted to EUR 39 million for the second half of 2018. Adverse market movements totaled EUR 1,040 million and favorable one-time items EUR 106 million, bringing normalized capital generation to EUR 973 million. Market impacts were mainly driven by the unfavorable equity market in the United States and the impact of adverse credit spread movements in the Netherlands.

One-time items were mainly driven by model & assumption changes in the Netherlands, which more than offset the impact of tax changes in the Netherlands and the acquisition of Robidus in the Netherlands. In the United States, several items, including the adverse impact of US tax reform on required capital and the benefit from the elimination of a variable annuity captive, largely offset each other.

Solvency II ratio

Aegon’s Solvency II ratio decreased from 215% to 211% during the second half of 2018 as normalized capital generation, favorable one-time items and other items were more than offset by payment of the interim 2018 dividend, adverse market impacts, and the Part VII transfer related to BlackRock’s defined contribution business in the United Kingdom.

The estimated RBC ratio in the United States decreased to 465% on December 31, 2018, from 490% on June 30, 2018. This decrease was mainly driven by the unfavorable impact from markets which was partly driven by lower than expected gains from implied volatility movements during the equity market decline. Furthermore, market movements included a negative impact of 10%-points from equity market movements on Transamerica Advisors Life Insurance Company (TALIC), which is planned to merge with Transamerica Life Insurance Company (TLIC) in 2019. One-time items largely offset each other and included the impact of US tax reform, the elimination of a variable annuity captive, the settlement of class action litigation with universal life policyholders, and the release of capital as a result of the previously announced strategic decision to exit the travel insurance, affinity and stop loss insurance segments.

The estimated Solvency II ratio in the Netherlands decreased to 181% on December 31, 2018, from 190% on June 30, 2018. The net positive impact of model & assumption changes was offset by adverse market impacts and the impact of tax changes in the Netherlands. At the end of 2018, Aegon updated its modeling of the dynamic volatility adjustment to align with the guidance from the European Insurance and Occupational Pensions Authority (EIOPA). This model change results in a change in credit sensitivities and increased 1-in-10 year combined sensitivities for the Netherlands, and as a result the company is reviewing the target zones for Aegon The Netherlands. Aegon is considering increasing the mid-point of the target zone by 5%-points to 10%-points. The positive impact from a change in modeling of the dynamic volatility adjustment more than offset other model & assumption changes, including changes to the assumptions regarding mortgages, mortality rates and lapses for individual life policies. For mortgages, Aegon changed a number of assumptions including reflecting changes to market conditions. Adverse market movements were the result of lower interest rates and the adverse impact of credit spread movements on the dynamic volatility adjustment before the aforementioned update to the model.

The estimated Solvency II ratio in the United Kingdom decreased to 184% on December 31, 2018, from 197% on June 30, 2018. The decrease was mainly driven by the completion of the Part VII transfer related to BlackRock’s defined contribution business, unfavorable interest rate movements, and the effect from changes in the equity hedging program, which led to an increase in required capital. Assumption changes were on balance positive, mainly as a result of lower expected future expenses resulting from the extended partnership with Atos for administration services related to the Existing Business as well as the favorable impact from mortality updates.

Final 2018 dividend

Aegon aims to pay out a sustainable dividend to allow equity investors to share in Aegon’s performance, which can grow over time if Aegon’s performance so allows. At the Annual General Meeting of Shareholders on May 17, 2019, the Supervisory Board will, in the absence of unforeseen circumstances, propose a final dividend for 2018 of EUR 0.15 per common share. If approved, and in combination with the interim dividend of EUR 0.14 per share paid over the first half of 2018, Aegon’s total dividend over 2018 will amount to EUR 0.29 per common share. This is an increase of EUR 0.02 per share or over 7% compared with the 2017 dividend. The final dividend will be paid in cash or stock at the election of the shareholder. The value of the stock dividend will be approximately equal to the cash dividend. Aegon intends to neutralize the dilutive effect of the final 2018 stock dividend on earnings per share in the third quarter of 2019, barring unforeseen circumstances.

If the proposed dividend is approved by shareholders, Aegon shares will be quoted ex-dividend on May 21, 2019. The record date for the dividend will be May 22, 2019. The election period for shareholders will run from May 28 up to and including June 14, 2019. The stock fraction will be based on the average share price on Euronext Amsterdam from June 10 until June 14, 2019. The stock dividend ratio will be announced on June 19, 2019, and the dividend will be payable as of June 21, 2019.

                           
Aegon N.V.                          
Holding excess cash                          
    2017   2018  
EUR millions   First half   Second half   Full Year   First half   Second half   Full Year  
Beginning of period   1,512   1,725   1,512   1,354   1,923   1,354  
                           
Dividends received   599   1,247   1,846   593   786   1,379  
Capital injections   (59)   (1,033)   (1,092)   (87)   (57)   (144)  
Divestments / (acquisitions)   -   3   3   196   (97)   98  
Net capital flows to the holding   540   218   757   701   632   1,333  
                           
Funding and operating expenses   (187)   (164)   (352)   (163)   (170)   (333)  
Dividends and share buybacks   (142)   (417)   (559)   (167)   (410)   (577)  
Leverage issuances / (redemptions)   -   -   -   200   (700)   (500)  
Other   3   (8)   (5)   (2)   (2)   (3)  
Holding expenses and capital return   (327)   (588)   (916)   (132)   (1,281)   (1,413)  
                           
End of period   1,725   1,354   1,354   1,923   1,274   1,274  
                           
                   
Aegon N.V.                  
Solvency II ratio                  
        Dec. 31,   June 30,   Dec. 31,  
EUR millions   Notes   2018   2018   2017  
Eligible Own Funds       17,602   17,092   15,628  
                   
Consolidated Group SCR       8,349   7,940   7,774  
                   
Solvency II ratio   11b, 12   211%   215%   201%  
                   
Eligible Own Funds to meet MCR       7,335   7,275   6,152  
                   
Minimum Capital Requirement (MCR)       1,965   1,909   1,930  
                   
MCR ratio       373%   381%   319%  
                   
United States - RBC ratio       465%   490%   472%  
The Netherlands - Solvency II ratio       181%   190%   199%  
United Kingdom - Solvency II ratio       184%   197%   176%  
                   

AIG Reports Fourth Quarter 2018 Results

  • Net loss of $622 million, or $0.70 per share, for the fourth quarter of 2018, compared to net loss of $6.7 billion, or $7.33 per share, in the prior-year quarter.
  • Adjusted after-tax loss of $559 million, or $0.63 per share, for the fourth quarter of 2018, compared to adjusted after-tax income of $526 million, or $0.57 per diluted share, in the prior-year quarter.
  • Total net investment income of $2.8 billion in the fourth quarter of 2018, compared to $3.5 billion in the prior-year-quarter was significantly impacted by market performance. Full year 2018 net investment income of $12.5 billion compared to $14.2 billion in the prior year.
  • Net pre-tax catastrophe losses in the fourth quarter of 2018 of $798 million ($630 million after-tax or $0.71 per share, at the statutory tax rate of 21%) consistent with the previously disclosed range. Full year 2018 net pre-tax catastrophe losses of $2.9 billion compared to $4.2 billion in the prior year.
  • Net unfavorable prior year loss reserve development of $365 million in the fourth quarter of 2018. For the full year 2018, net unfavorable prior year loss reserve development of $362 million compared to $978 million for the prior year.
  • Share and warrant repurchases of $750 million for the fourth quarter of 2018 and $1.8 billion for full year 2018.
  • AIG Board of Directors increased the share repurchase authorization to $2.0 billion, including approximately $512 million that remained under the previous authorization.

American International Group, Inc. (NYSE: AIG) has reported a net loss of $622 million, or $0.70 per share, for the fourth quarter of 2018, compared to a net loss of $6.7 billion, or $7.33 per share, in the prior-year quarter. Adjusted after-tax loss was $559 million, or $0.63 per share, for the fourth quarter of 2018, compared to adjusted after-tax income of $526 million, or $0.57 per diluted share, in the prior-year quarter.

Brian Duperreault, AIG’s President and Chief Executive Officer, said: “Throughout 2018, significant foundational work was undertaken to remediate AIG’s core underwriting capabilities. While many issues and challenges were uncovered, we moved quickly to reduce risk and volatility, as well as implement strategies that we believe will accelerate our progress in 2019. The world class talent that joined AIG throughout 2018 was a highlight, and our team is not taking short cuts in building a top performing enterprise nor are we settling for easy fixes. Our work continues to restore AIG as the leading insurance company in the world and I remain confident we are on the right path to achieve long-term, sustainable and profitable growth.

“Our fourth quarter 2018 results showed positive improvements in General Insurance, reflecting actions we took throughout the year to re-position and strengthen the business, and Life and Retirement remains a stable source of earnings with attractive returns. Results were negatively impacted by performance in both equity and credit markets, catastrophe losses that came within our previously disclosed guidance, as well as modest net unfavorable prior year loss reserve development driven largely by underwriting decisions from 2016 and prior years. We continue to expect to achieve an underwriting profit entering 2019 in General Insurance and to reach double digit returns for consolidated AIG in three years.”

FOURTH QUARTER FINANCIAL SUMMARY*

       
      Three Months Ended

December 31,

($ in millions, except per share amounts)       2018         2017  
Net loss     $ (622 )    

$

(6,660

)

Net loss per diluted share (a)     $ (0.70 )    

$

(7.33

)

Adjusted after-tax income (loss)     $ (559 )    

$

526

 
Adjusted after-tax income (loss) per diluted share (a)     $ (0.63 )    

$

0.57

 
             
Return on equity       (4.3 )%       (38.7 )%
Adjusted return on equity       (4.6 )%       4.2 %
Adjusted return on attributed equity - Core       (4.3 )%       2.6 %
             
Book value per common share     $

65.04

     

$

72.49

 
Book value per common share, excluding accumulated other comprehensive income       66.67         66.41  
Adjusted book value per common share       54.95         54.74  

*Refer to the Comments on Regulation G and the tables that follow for a discussion of non-GAAP financial measures and the reconciliations of the non-GAAP financial measures to GAAP measures.

(a)

  For periods reporting a loss, basic average common shares outstanding are used to calculate net income (loss) per diluted share.
     

FOURTH QUARTER 2018 HIGHLIGHTS

All comparisons are against the fourth quarter of 2017, unless otherwise indicated.

Net Investment Income Impacted by Alternative Returns and Equity Market Declines – Fourth quarter net investment income from our insurance companies, including the Legacy insurance portfolios, decreased 18.1% from the prior-year quarter to $2.8 billion. The fourth quarter was impacted by net losses on alternative investments as well as investments in equity securities resulting from elevated volatility in the credit markets and unfavorable performance in the equity markets. For the full year, net investment income from our insurance companies, including the Legacy insurance portfolios, totaled $12.7 billion.

General Insurance – The fourth quarter of 2018 combined ratio of 115.0 was impacted by 11.3 points related to catastrophe losses net of reinstatement premiums and 5.3 points of net unfavorable loss reserve development. The accident year combined ratio, as adjusted, was 98.8 comprised of a 63.9 loss ratio, as adjusted, down 130 basis points from the prior-year quarter, and an expense ratio of 34.9, down 10 basis points over the prior-year quarter. Pre-tax catastrophe losses, net of reinsurance, included $826 million for General Insurance, primarily related to Hurricane Michael and the California Wildfires and a $28 million decrease in the loss estimates for Typhoon Jebi reported in the Legacy segment. Net prior year loss reserve development was unfavorable by $363 million for the quarter. North America and International Commercial Lines had unfavorable prior year loss reserve development of $326 million and $74 million, respectively, for the quarter driven largely by Financial Lines. International Personal Insurance recorded favorable prior year loss development of $37 million primarily from Japan.

Fourth quarter expense ratio of 34.9 primarily reflected improvement in the General operating expense (GOE) ratio as a result of expense reduction actions taken in the second half of the year, partially offset by an increase in the North America acquisition ratio due to changes in portfolio mix.

Life and Retirement Earnings – Fourth quarter adjusted pre-tax income of $623 million reflected the impact of declining equity markets and widening credit spreads in all businesses, against a backdrop of attractive new business margins, and solid growth in premiums and deposits in Individual Retirement, Group Retirement and Life Insurance as well as several opportunistic Institutional Markets transactions. GOE increased primarily due to new business acquisition, international expansion, and investments in core businesses. The fourth quarter of 2018 Adjusted Return on Equity was 9.8%.

Legacy Results – Fourth quarter adjusted pre-tax loss of $150 million, compared to adjusted pre-tax income of $411 million in the prior-year quarter, reflect lower net investment income and losses from fair value option assets, as well as a $105 million pre-tax charge resulting from loss recognition testing on certain Accident & Health cancer and disability blocks. AIG completed the sale of 19.9% of AIG’s ownership interest in Fortitude Holdings, the parent of Fortitude Re (formerly DSA Re), to The Carlyle Group L.P.

Liquidity and Capital – As of December 31, 2018, AIG Parent liquidity stood at approximately $3.8 billion. In the fourth quarter, AIG Parent received approximately $350 million of distributions from the insurance subsidiaries in the form of cash and fixed maturity securities, including tax sharing payments. In the fourth quarter, AIG repurchased 18.0 million shares of common stock for $745 million and warrants for $5 million. AIG’s Board of Directors has approved an increase in our share repurchase authorization to $2.0 billion, including approximately $512 million that was remaining under the previous authorization.

Book Value per Common Share – As of December 31, 2018, book value per common share was $65.04 compared to $72.49 at December 31, 2017. Book value per common share excluding accumulated other comprehensive income and deferred tax assets (Adjusted book value per common share) was $54.95, up slightly from prior-year end.

GENERAL INSURANCE

                 
      Three Months Ended December 31,          
($ in millions)       2018       2017       Change  
Total General Insurance                          
Gross premiums written     $ 7,699     $ 7,278       6 %
Net premiums written     $ 6,424     $ 5,892       9  
Underwriting loss     $ (1,071)     $ (846)       (27)  
Adjusted pre-tax income (loss)     $ (722)     $ 13       NM  
                           
Underwriting ratios:                          
Loss ratio       80.1       78.3       1.8 pts
Impact on loss ratio:                          
Catastrophe losses and reinstatement premiums       (11.3)       (11.7)       0.4  
Prior year development       (5.3)       (1.4)       (3.9)  
Adjustments for ceded premium under reinsurance                          

contracts and other

      0.4       -       0.4  
Accident year loss ratio, as adjusted       63.9       65.2       (1.3)  
Expense ratio       34.9       35.0       (0.1)  
Combined ratio       115.0       113.3       1.7  
Accident year combined ratio, as adjusted       98.8       100.2       (1.4)  
                           

General Insurance - North America

               
      Three Months Ended December 31,        
($ in millions)       2018     2017     Change
North America                      
Net premiums written     $ 2,944   $ 2,583     14 %
Commercial Lines       2,161     1,808     20  
Personal Insurance       783     775     1  
                       
Underwriting income (loss)     $ (871)   $ (316)     (176)  
Commercial Lines       (541)     16     NM  
Personal Insurance       (330)     (332)     1  
                       
Adjusted pre-tax income (loss)     $ (575)   $ 412     NM  
                       

Underwriting ratios:

                     
North America                      
Loss ratio       94.6     83.0     11.6 pts
Impact on loss ratio:                      
Catastrophe losses and reinstatement premiums       (19.6)     (24.5)     4.9  
Prior year development       (10.0)     3.3     (13.3)  
Adjustments for ceded premium under reinsurance                      

contracts and other

      0.9     -     0.9  
Accident year loss ratio, as adjusted       65.9     61.8     4.1  
Expense ratio       30.7     28.5     2.2  
Combined ratio       125.3     111.5     13.8  
Accident year combined ratio, as adjusted       96.6     90.3     6.3  
                       
North America Commercial Lines                      
Loss ratio       93.6     73.9     19.7 pts
Impact on loss ratio:                      
Catastrophe losses and reinstatement premiums       (9.8)     (12.0)     2.2  
Prior year development       (13.3)     4.9     (18.2)  
Adjustments for ceded premium under reinsurance                      

contracts and other

      1.2     -     1.2  
Accident year loss ratio, as adjusted       71.7     66.8     4.9  
Expense ratio       27.3     25.3     2.0  
Combined ratio       120.9     99.2     21.7  
Accident year combined ratio, as adjusted       99.0     92.1     6.9  
                       
North America Personal Insurance                      
Loss ratio       98.0     108.0     (10.0) pts
Impact on loss ratio:                      
Catastrophe losses and reinstatement premiums       (49.8)     (58.6)     8.8  
Prior year development       -     (1.1)     1.1  
Accident year loss ratio, as adjusted       48.2     48.3     (0.1)  
Expense ratio       41.6     37.5     4.1  
Combined ratio       139.6     145.5     (5.9)  
Accident year combined ratio, as adjusted       89.8     85.8     4.0  

All comparisons are against the fourth quarter of 2017, unless otherwise indicated. Refer to the AIG Fourth Quarter 2018 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.

General Insurance North America – Commentary

  • Adjusted pre-tax loss of $575 million compared to adjusted pre-tax income of $412 million in the prior-year quarter.
  • Net investment income of $296 million for the quarter compared to $728 million in the prior-year quarter. The decline in net investment income was largely the result of net losses on alternative and equity investments in the current quarter.
  • Net premiums written increased by 14.0%, largely due to the acquisitions of Validus and Glatfelter, and lower ceded premiums due to changes in the 2018 reinsurance programs. This was slightly offset by some underlying reduction in the North America Commercial Lines business due to ongoing underwriting actions to improve performance.
  • The North America combined ratio of 125.3 included 19.6 points of catastrophe losses net of reinstatement premiums and 10.0 points of net unfavorable prior year loss reserve development. The accident year combined ratio, as adjusted, was 96.6 for the quarter comprised of a 65.9 loss ratio, as adjusted, and a 30.7 expense ratio. The pre-tax underwriting loss of $871 million includes $689 million of catastrophe losses, net of reinsurance, of which $414 million related to North America Personal Insurance and $275 million related to Commercial Lines. Net unfavorable prior year loss reserve development of $326 million was primarily related to Financial Lines in Commercial Lines.
  • The increase in the expense ratio reflected a higher acquisition expense ratio driven by changes in portfolio mix, especially in Personal Insurance, and a decrease in GOE resulting from actions taken in the second half of 2018 to control expenses.

General Insurance - International

               
      Three Months Ended December 31,        
($ in millions)       2018     2017     Change  
International                      
Net premiums written     $ 3,480   $ 3,309     5 %
Commercial Lines       1,561     1,422     10  
Personal Insurance       1,919     1,887     2  
                       
Underwriting income (loss)     $ (200)   $ (530)     62  
Commercial Lines       (251)     (603)     58  
Personal Insurance       51     73     (30)  
                       
Adjusted pre-tax loss     $ (147)   $ (399)     63  
                       

Underwriting ratios:

                     
International                      
Loss ratio       66.8     74.7     (7.9) pts
Impact on loss ratio:                      
Catastrophe losses and reinstatement premiums       (3.7)     (2.2)     (1.5)  
Prior year development       (1.0)     (4.8)     3.8  
Accident year loss ratio, as adjusted       62.1     67.7     (5.6)  
Expense ratio       38.6     39.8     (1.2)  
Combined ratio       105.4     114.5     (9.1)  
Accident year combined ratio, as adjusted       100.7     107.5     (6.8)  
                       
International Commercial Lines                      
Loss ratio       80.5     98.0     (17.5) pts
Impact on loss ratio:                      
Catastrophe losses and reinstatement premiums       (7.2)     (2.7)     (4.5)  
Prior year development       (4.1)     (11.4)     7.3  
Accident year loss ratio, as adjusted       69.2     83.9     (14.7)  
Expense ratio       33.1     37.7     (4.6)  
Combined ratio       113.6     135.7     (22.1)  
Accident year combined ratio, as adjusted       102.3     121.6     (19.3)  
                       
International Personal Insurance                      
Loss ratio       53.4     54.6     (1.2) pts
Impact on loss ratio:                      
Catastrophe losses and reinstatement premiums       (0.2)     (1.8)     1.6  
Prior year development       2.0     0.8     1.2  
Accident year loss ratio, as adjusted       55.2     53.6     1.6  
Expense ratio       43.9     41.7     2.2  
Combined ratio       97.3     96.3     1.0  
Accident year combined ratio, as adjusted       99.1     95.3     3.8  

All comparisons are against the fourth quarter of 2017, unless otherwise indicated. Refer to the AIG Fourth Quarter 2018 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.

General Insurance International – Commentary

  • Adjusted pre-tax loss of $147 million compared to adjusted pre-tax loss of $399 million in the prior-year quarter.
  • Net investment income of $53 million for the quarter compared to $131 million in the prior-year quarter. The decline in net investment income was largely the result of net losses on equity investments in the current quarter.
  • Net premiums written increased 5.2% on a reported and 7.6% on a constant dollar basis. The increase in net premiums written was due to the inclusion of the Talbot acquisition and increased accident & health business in Asia Pacific.
  • The International combined ratio of 105.4 included 3.7 points of catastrophe losses net of reinstatement premiums and 1.0 points of net unfavorable loss reserve development. The accident year combined ratio, as adjusted, of 100.7 was comprised of a 62.1 loss ratio, as adjusted, and a 38.6 expense ratio. The catastrophe losses and net unfavorable loss reserve development was largely a result of the Commercial portfolio. The pre-tax underwriting loss of $200 million included $137 million of catastrophe losses, net of reinsurance, severe losses of $79 million, net of reinsurance, and net unfavorable prior year loss reserve development of $37 million.
  • The expense ratio decrease was driven by a reduction in GOE given actions in the second half of the year, partially offset by higher acquisition expense ratio primarily due to increased costs in Japan and changes to the portfolio mix.

LIFE AND RETIREMENT

        Three Months Ended December 31,        
($ in millions)       2018     2017     Change
Life and Retirement                      
Premiums & Fees     $ 1,917   $ 2,123     (10) %
Net Investment Income       1,921     2,003     (4)  
Adjusted Revenue       4,065     4,382     (7)  
Benefits, losses and expenses       3,442     3,600     (4)  
Adjusted pre-tax income       623     782     (20)  
Premiums and deposits       8,166     7,965     3  
                       
Individual Retirement                      
Premiums & Fees     $ 209   $ 210     - %
Net Investment Income       912     1,030     (11)  
Adjusted Revenue       1,276     1,415     (10)  
Benefits, losses and expenses       949     941     1  
Adjusted pre-tax income       327     474     (31)  
Premiums and deposits       4,225     3,106     36  
Net flows       (510)     (422)     (21)  
                       
        Three Months Ended December 31,        
($ in millions)       2018     2017     Change
Group Retirement                      
Premiums & Fees     $ 111   $ 120     (8) %
Net Investment Income       517     550     (6)  
Adjusted Revenue       682     732     (7)  
Benefits, losses and expenses       523     486     8  
Adjusted pre-tax income       159     246     (35)  
Premiums and deposits       2,106     1,848     14  
Net flows       (628)     (453)     (39)  
                       
Life Insurance                      
Premiums & Fees     $ 741   $ 732     1 %
Net Investment Income       287     263     9  
Adjusted Revenue       1,045     1,013     3  
Benefits, losses and expenses       958     1,011     (5)  
Adjusted pre-tax income       87     2     NM  
Premiums and deposits       987     963     2  
                       
Institutional Markets                      
Premiums & Fees     $ 856   $ 1,061     (19) %
Net Investment Income       205     160     28  
Adjusted Revenue       1,062     1,222     (13)  
Benefits, losses and expenses       1,012     1,162     (13)  
Adjusted pre-tax income       50     60     (17)  
Premiums and deposits       848     2,048     (59)  
                       

All comparisons are against the fourth quarter of 2017, unless otherwise indicated. Refer to the AIG Fourth Quarter 2018 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.

Life and Retirement – Commentary

  • In Individual Retirement, adjusted pre-tax income reflected lower net investment income due to lower base spreads and yield enhancements and lower fee income driven by unfavorable credit and equity market performance. Net flows excluding Retail Mutual Funds were positive and reflected strong sales.
  • In Group Retirement, adjusted pre-tax income reflected lower fee income, lower base spread and yield enhancements driven by unfavorable credit and equity market performance and continued investments made in the business. Group Retirement net flows reflected higher sales offset by higher surrenders due to the loss of large plan accounts, as well as higher individual surrenders.
  • In Life Insurance, adjusted pre-tax income reflected higher net investment income due to business growth and higher alternative investments returns. Mortality was favorable to pricing expectations.
  • In Institutional Markets, adjusted pre-tax income reflected investments in technology and infrastructure and reserve refinements, partially offset by growth in the portfolio which drove higher net investment income.

AM Best Upgrades Issuer Credit Rating Of MAPFRE Panamá S.A.

AM Best has upgraded the Long-Term Issuer Credit Rating (Long-Term ICR) to “a+” from “a” and affirmed the Financial Strength Rating of A (Excellent) of MAPFRE Panamá S.A. (MAPFRE Panamá) (Panama City, Panama). The outlook of these Credit Ratings (ratings) remains stable.

The ratings reflect MAPFRE Panamá’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate enterprise risk management (ERM).

The Long-Term ICR upgrade reflects MAPFRE Panamá’s strategic importance to, and strategic alignment with, MAPFRE Internacional S.A., as well as the synergies and operating efficiencies derived from being a group member of MAPFRE S.A., the leading insurer in Spain.

The ratings reflect MAPFRE Panamá’s strong risk-adjusted capitalization and geographic importance to MAPFRE S.A. (MAPFRE Group) in Central America’s insurance market, as well as the integration of the MAPFRE Group’s practices and procedures into MAPFRE Panamá. The company maintained its market position in 2018, ranked as Panama’s third-largest insurer as of November 2018.

Partially offsetting these positive rating factors are the competitive dynamics that persist in the property/casualty (P/C) segment despite healthier growth rates.

MAPFRE Panamá is the third-largest insurer in Panama, ranking third in the life, auto and P/C segment. Panama’s insurance industry has shown signs of recovery as of November 2018, growing at a 5.8% rate, while MAPFRE grew slightly below that during this period, after growing 7.1% in 2017. Fluctuations in growth during 2017 and 2018 are explained by fluctuations in the surety business, with a higher volume in 2017 and lower in 2018.

MAPFRE Panamá’s solid capital base and good reserve position provide a solid base for financial flexibility and strong risk-adjusted capitalization levels. AM Best expects that the company’s ERM practices and procedures implemented from the MAPFRE Group continue to affect MAPFRE Panamá’s future performance positively.

MAPFRE Panamá’s combined ratio as of September 2018 has improved to 95.6% due to lower loss ratio, as underwriting has been adjusted to reflect its risk experience. Administrative and acquisition expenses have remained stable.

The strong competitive environment in Panama’s insurance market, especially in segments in which MAPFRE Panamá has leading positions, continues to generate challenging market conditions and increase risk appetites across the industry, presenting operating performance challenges in specific segments such as auto, individual life and health.

Positive rating actions taken on its ultimate parent, MAPFRE S.A., also could result in further positive rating actions for MAPFRE Panamá.

Negative rating actions could result from a significant reduction in MAPFRE Panamá’s risk-adjusted capitalization, either by constant deterioration in its underwriting performance or unexpected losses that render this measure to a level that no longer supports the current ratings, or if the company deviates significantly from the policies, practices and benefits assumed from its association with MAPFRE Group. Additionally, negative rating actions at its ultimate parent could lead to a downgrade of MAPFRE Panamá ratings.

Healix Health Services Mental Health And Wellbeing White Paper Helps Brokers Guide Employers’ Mental Health Strategies

2018 was unquestionably a turning point in awareness about mental ill health with a wide range of high profile individuals urging employers, as well as the wider community, to put the issue front and centre. 

Employers recognise the importance of understanding mental health issues – and providing workers with the support they need to manage their mental health and wellbeing in the same way their physical health is supported.  However, Healix Health Services, the health trust specialist, believes that employers face a myriad of challenges in how to incorporate mental health into over-arching wellbeing strategies, particularly as the NHS continues to struggle to meet demand for access to mental health professionals.

Healix Health Services has, therefore, produced a white paper to help brokers guide their clients on including mental health in their corporate wellbeing plans. ‘Mental Health and Wellbeing’ outlines the current landscape and the challenges, as well as offering steps to help organisations establish a mental health strategy that mitigates the issues leading to absence.

In particular, the white paper focuses on the stigma associated with mental health and the importance of considering barriers to progress, including language, culture and behaviour.

“Our white paper outlines how to implement a mental health strategy, tackling issues such as employees believing mental ill health may limit career progression”, explained Sally Campbell, Head of Clinical Development, Healix Health Services and author of the white paper. “Organisations need to learn the importance of communication and training, as well as creating awareness activities to engage with staff and cultivate a positive culture, as part of a holistic approach to workplace wellbeing.

“Senior executives can play a key role in fostering an open and healthy workplace culture, ensuring change starts at the top and filters down through the company. And our white paper highlights the importance of supporting any culture shifts with an effective strategy that incorporates a full range of services offering mental health care and guidance, alongside traditional corporate healthcare services. It offers brokers a guide to helping their clients take a holistic approach to their wellbeing strategy and reap the benefits of a healthier and supportive workplace culture.”

Healix International Signs Up To UN Global Compact

Healix International, the global travel risk management and international medical and security assistance provider, has signed up to the United Nations Global Compact (UNGC); a voluntary commitment from businesses to act in an environmentally and socially responsible way. The largest initiative of its type, 9,933 companies across 160 countries have joined so far, since it was announced by Kofi Annan in 1999.

Healix International’s decision to sign up for the UNGC demonstrates the company’s commitment to operating in an ethical manner.

Companies signing up to the UNGC are committing to taking a principles-based approach to doing business.  The 10 principles of the UNGC are derived from the Universal Declaration of Human Rights and other global programmes and strategies to create a framework that expects businesses to operate in ways that meet fundamental responsibilities, in terms of human rights, labour, environment and anti-corruption.

Healix International CEO, Mike Webb, said: “This is an opportunity for Healix International to continue to enhance the way it does business by incorporating the 10 Principles of the UNGC into our policies, procedures and strategies. We are excited to align our business with these universal principles and will be submitting a yearly communication of our progress.

“Crucially, this commitment forms part of our focus on building a company culture based on integrity and recognising our responsibility to humanity and the planet as a whole. We firmly believe this is the best way to build a sustainable business focused on long-term success.”

More Healix International News, check their micro web site on iPMI Magazine, click here.

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