Northern Rock hedges on latest base rate cut

Northern Rock mortgage borrowers will not all receive the full benefit of last week’s cut in the base rate.

The nationalised lender’s tracker rate customers will see the full 1% reduction but for those on its standard variable rate (SVR) the reduction will be 0.5% taking the rate down to 5.34%, from 1st January.

Mortgage borrowers, who have remained loyal to Northern Rock for seven years and therefore qualify for a 0.25% discount below SVR, will pay interest at 5.09%.

The bank passed on November’s dramatic 1.5% base rate cut in full and says it latest decision comes after giving careful consideration to both borrowers and savers.

In November, its rates for savers were unchanged although a review is currently taking place.

However, Northern’s Rock’s response to December’s base rate cut flies in the face of government threats.

Ministers have warned that lenders could face legal action if they fail to pass on reductions in full.

The dilemma for lenders was addressed this week by the director general of the Council of Mortgage Lenders, who accused the Government of producing policy objectives that are conflicting and incoherent.

Banks and building societies need to recapitalize to weather the credit crisis and therefore want to maintain attractive savings rates.

At the same time, the Government is insisting that lending to individuals and businesses increases and that base rate cuts are passed on in full.

Meanwhile, three-month Libor, the key rate at which banks lend to one another to fund mortgage business, remains well above the base rate.

Source : Here

Government may guarantee banks’ lending

The Government is reported to be considering a range of new measures that could free up lending.

When the banks were bailed out with £50 billion of taxpayer cash in October, ministers made it clear that they expected the UK’s High Street banks to restore lending to businesses and individuals.

Business Secretary, Peter Mandelson, has since threatened banks with legal action if they fail to keep their end of the bargain.

However, lenders have been fighting back, with the director general of the Council of Mortgage Lenders describing the Government’s policy objectives as “conflicting and incoherent” because lenders need to recapitalise, and therefore attract retail deposits, but are at the same time facing Government demands that cuts in the base rate are passed on in full to borrowers.

Meanwhile, a report by the National Institute of Economic and Social Research published earlier this week warned that the UK economy could enter a deep recession in the final quarter of 2008 and suggested that there is a very urgent need for the Government to address the availability of credit.

According to reports in the press, ministers are now considering providing guarantees for new lending, such as loans to small businesses, mortgages and car finance.

Details of a scheme that would charge banks a fee in return for the guarantee are expected shortly.

Source : Here

Nationwide releases new online banking product

Nationwide Building Society has launched a new online savings product.

E-Savings Plus accounts are run like Nationwide’s FlexAccounts, and offer savers a gross AER of up to 3.75%.

The new account is designed for savers who want a competitive interest rate, but also need to access their savings.

Customers can withdraw money from the account up to three times per year and still benefit from the top rate of 3.75% gross per annum.

Extra withdrawals will incur the penalty of a lower interest rate, backdated either from account opening or from anniversary of account opening.

An E-Savings Plus account can be opened for as little as £1. There is no limit on deposits as long as the account balance stays under £100,000.

Nationwide’s director of savings, Matthew Carter, said the new E-Savings Plus account gives savers even more choice for where to put their money.

A recent survey by price comparison site moneysupermarket.com found that Nationwide is the most trusted high street bank in the UK for savings.

Last year, Nationwide celebrated its tenth anniversary of internet banking, a service which it launched in 1997. Over 3 million customers now use Nationwide’s online banking facilities.

Source : Here

Internet favorite for advice on savings

Britons are turning their attention to saving as predictions for a deepening of the economic recession through 2009 make worrying headlines.

A recent survey by Alliance & Leicester found that 29% of people questioned had been cutting back on their spending to save more.

The research also revealed that 48% of savers use the Internet to find the best rates.

Among young adults the urge to save was even greater, with 36% making sacrifices to bump up their deposits and 56% using the Internet choose a provider.

Meanwhile, 31% of people surveyed said they made savings decisions based on intelligence from family and friends.

Twenty-two per cent sought guidance from an independent financial adviser and 19% turned to daily newspapers.

Earlier this week, Nationwide reported that the proportion of Britons saving regularly had increased to 52% between October and November, up from 47% a month earlier.

The building society suggested that the rise reflected recent cuts in the Bank of England’s base rate, which have eased family budgets.

Source : Here

Abbey locks out online business customers

Abbey has upgraded its online facility for business customers, some of whom have since been locked out of their accounts.

Work was carried out on the website last weekend when the system was brought into line with the one used by personal banking customers.

The transfer took place on Sunday, since when difficulties with re-registering and new security codes have been reported on blogs and by email to the BBC.

According to reports, if the new log-in process is not followed correctly customers have to contact an Abbey’s call centre to request new security information.

Long queues have meant delays in getting through and have exasperated business customers trying to deal with the difficulties of the recession while maximising on trade in the run-up to Christmas.

Abbey has apologised for the inconvenience, explaining that the majority of customers have re-registered successfully for their main accounts but some have been unable to access secondary accounts.

However, bloggers have reported that the problems are widespread.

Last year Abbey’s online system hit the headlines when some people logged on to see details relating to other customers.

Site users were shown their own name but with the account details of an entirely different customer.

At the time, Abbey said the incident represented more of a presentational error than a security risk.

Source : Here

Credit card providers discover the principle of fairness

Credit card companies have come up with a set of principles that should help customers who fall into arrears on repayments.

Pressure has been mounting on credit card lenders since last month, when research from Defaqto showed the average annual percentage rate rising from 17.2% in May to 17.6% in November, while over the same period the base rate fell by 2%.

Companies were also accused of increasing rates in time to catch out Christmas shoppers and ministers threatened an Office of Fair Trading investigation into their practices, which included raising interest rates for borrowers in financial difficulties.

Barclaycard, Lloyds TSB and Capital One responded initially with an offer of a 30 day period of grace to customers in financial difficulties and this has now been extended to 60 days, for all credit card lenders.

Other measures to be adopted across the industry mean that providers will allow borrowers to transfer deals and to freeze accounts at existing rates.

Providers have agreed not to raise rates if customers can show they are working to solve repayments problems with a debt advice group, or already have a payment plan in place.

In addition, they will disband the practice of hiking rates when a customer fails to make a minimum repayment for more than two months.

Also from 1st January, customers will receive 30 days’ notice of rate rises and there will be no rate rise during the first 12 months of a credit or store card contract. Thereafter increases will only be applied every six months.

Finally, the Government is advising borrowers who believe they have been the victims of unreasonable interest rate hikes to complain to their card provider or to the Financial Ombudsman Service.

Source : Here

Insiders Say AIG Slashing Prices to Win Business in Moves That May Burn Rivals, Taxpayers

American International Group Inc. is slashing prices to win new business, industry insiders say, raising concerns that taxpayers could again be left to pick up the tab.

Advertisement

AIG, once the world's biggest insurer by market value, was rescued by the U.S. government in September as the cost of meeting counterparty obligations on bad mortgage bets left it close to bankruptcy.

In the wake of its federal bailout, which last month swelled to more than $150 billion, industry executives say AIG has been rashly lowering prices, and at a time when market fundamentals show insurance rates need to rise.

"AIG has intensified its effort to increase its market share, or at least preserve it," said Edmund Kelly, chief executive of Boston-based rival Liberty Mutual.

"I think it's fair to say they're doing some very stupid things in the market," Kelly told investors on a quarterly conference call last month. "If (AIG units) are not reined in, it could be very destabilizing for the market."

The New York-based insurer denies it is cutting prices.

But in one example of its aggressive rate-cutting, a unit of its commercial insurance division agreed to provide coverage for the Las Vegas McCarran International Airport at a price 60 percent below what was charged for the same policy a year earlier.

Last year the airport paid $3.54 million to a consortium of seven insurers led by Travelers Group for a property, boiler and machinery insurance policy worth $1.7 billion, an airport spokesman said.

'A QUICK WAY TO GOING OUT OF BUSINESS'

This year the airport got its coverage from Lexington Insurance Co., a large AIG unit, for just $1.4 million. The insurer agreed to take on the airport coverage with one other insurer, compared with the seven that had been on the program the prior year, leaving fewer carriers to shoulder any potential losses.

By selling policies for less while taking on more risk, AIG is raising the chances that it will be hit by large losses. It also makes it harder for other insurers to sell policies that are priced high enough to cover potential losses.

"Cutting rates at a time when rates should be strengthening is a quick way to going out of business," AIG's former chief executive, Maurice "Hank" Greenberg, a frequent critic of the company's management, told Reuters.

Greenberg, who left AIG in 2005 and now runs several private insurance and investment firms, said there is little cross-over between his business and AIG, but where there is, his staff say AIG is beating down the market.

"In some classes that we do compete in, they are cutting rates to hold on to business," Greenberg said in an interview.

The rate cuts come even as many analysts say deep investment losses and rising claims from a range of events, including hurricanes and lawsuits against financial executives, mean insurers are now widely expected to start charging more for many types of coverage when policies are renewed throughout 2009.

"Rate increases are necessary to make the returns commensurate with risk," said Jeanne Hollister, managing principal of consulting firm Towers Perrin's Americas property/casualty insurance practice.

IRRESPONSIBLE AND UNFAIR?

For AIG to fight the trend could potentially weaken its own business as well as rivals.

"AIG has the money to do things that it could not do without it," said Thom Bradshaw, an insurance wholesaler in Monticello, Indiana. "With $150 billion of taxpayer money we could all be more aggressive, but a) it is irresponsible and b) it is unfair" to the rest of the industry, he added.

To be sure, it is possible for insurers to sometimes use modeling techniques and other risk tools to price policies more competitively, but critics says in many cases AIG is simply driving down prices to win business.

When losses lead to an insurance company's collapse, rivals often have to foot the bill through insurer-funded guaranty funds formed by many U.S. states and some countries.

Cliff Gallant, an insurance analyst with Keefe, Bruyette & Woods in New York, noted that AIG's insurance units are highly rated and not at risk of collapse.

But if that changed, "it would cause considerable strain on the industry," Gallant said.

It is also possible that the U.S. government, as AIG's majority owner, would feel obliged to step in with more financial support for the insurance subsidiaries if underwriting losses become a problem.

About $15 billion of a $60 billion government loan to AIG had already been consumed by its insurance units as of Nov. 5, according to the company's latest quarterly filing.

"One way or another, I don't see how it is avoidable: The amount that the government will ultimately apply to AIG will exceed the amount that it has provided so far," said Donn Vickrey, an analyst with research firm Gradient Analytics.

Source : Here

East Asia will not escape economic challenges

Asian economies will not escape the economic storm unscathed, according to the World Bank’s regular biannual report on the economic health of the East Asia & Pacific region.

Real terms GDP growth in developing East Asia this year is expected to be 8.5%, but is predicted to fall to 6.7% amid weakening export growth and declining investment.

For the entire region (including economies such as Singapore and Malaysia) GDP will fall from 7% this year to 5.3% the next.

VP for the East Asia and Pacific region Jim Adams has stated his admiration for the rapid policy interventions of regional governments to avert the worst effects of the financial crisis.

Because of these actions, Adams said, the banking system in the region remained stable and economic stimulus packages were being put in place.

As a result, the region is staying stable and retaining growth, and is predicted to contribute around one third of the global economy’s growth next year.

Source : Here

NZ governor calls for all economic sectors to aid the recovery

The Reserve Bank of New Zealand’s Governor Alan Bollard has warned that further loosening of moentary policy is contingent upon all economic sectors reacting to reduced demand and not increasing inflationary pressure.

Bollard has stated that New Zealand’s economy will be aided in its recovery by easing monetary policy, but that such an action would only be possible if inflationary pressures did not re-emerge.

The governor also warned against the risk of considering inflation to be yesterday’s problem, citing the September CPI figure of 5.1%, the highest since 1990.

Globally, commodity prices have been falling as consumer demand across the world has declined, and Bollard has called for further price cuts to follow on from this.

The Official Cash Rate has also fallen sharply, and has been reduced by 325 basis points since July.

Although banks have reduced their own rates, they do not match the official fall in interest rates.

Governor Bollard has called on the electricity firms not to keep hiking rates, for food, petrol and transport companies to reduce prices and for the banks to pass on cuts made by the Reserve Bank.

Source : Here

Central bankers in China, Korea and Japan to meet annually

The central banks of China, Korea and Japan have agreed to meet on a regular basis in Tripartite Governors’ Meetings.

The People’s Bank of China, the Bank of Japan and the Bank of Korea will discuss economic matters that concern the region, financial developments and common ground regarding central banking.

Informal dialogue has taken place between the three central banks for some years, and this latest move is intended to provide a stronger opportunity for debate and co-operation.

It is hoped that through the regular meetings the Chinese, Korean and Japanese central banks will enhance regional stability in terms of both the monetary and financial spheres.

The meetings are initially planned to take place on an annual basis.

The People’s Bank of China will host the first meeting next year.

Source : Here

Study sees link between ERM, higher credit rating

NEW YORK—A soon-to-be published Risk & Insurance Management Society study suggests a correlation between organizations with formalized enterprise risk management programs and those with higher credit ratings.

Beginning in December 2006, risk practitioners from 564 organizations participated in an in-depth assessment of ERM for RIMS’ “2008 State of ERM Report.”

Using RIMS’ Risk Maturity Model—which outlines best practices for developing and maintaining effective ERM programs—participants compared their organizations’ ERM activities to 25 metrics or so called “competency drivers” believed to be necessary for an effective, efficient ERM program.

Based on those assessments, the 2008 report found that organizations with formalized ERM programs scored 90% better in RMM index scores for all risk management competency drivers than did organizations without formalized ERM programs. And those organizations with higher RMM scores generally had higher credit ratings, the study showed.

“The study substantiates the value of ERM for organizations regardless of type of the organization and that a well-implemented ERM program is characteristic of a well-managed company,” said Carol Fox, senior director-risk management for Convergys Corp. in Cincinnati and chair of New York-based RIMS’ ERM development committee. “Given the current state of the global economic crisis, companies need to, at a minimum, take aggressive actions to institutionalize their risk management programs,” she said.

Ms. Fox noted that while organizations with ERM programs may be better managed, the study found that only 4% of companies that had ERM programs achieved the two highest levels of RMM in all their risk competencies. “What that tells us is that ERM is still in development stage,” she said. There is still a lot of work to be done.”

The report will be available next week. Survey participants can receive a copy at no cost. The cost for RIMS members is $250 to $500, depending on membership status and the cost for nonmembers is $750.

Source : here

MIB Life Index Reports North American Life Insurance Activity Off 1.9% in November

BRAINTREE, Mass., Dec. 5 /PRNewswire/ -- North American application activity for individually underwritten life insurance was down -1.9% in November year-over-year, according to the MIB Life Index (SM). Year to date (YTD) U.S. and Canadian activity remained stable, off -1.9% versus the same eleven months last year. November's activity was off -0.9% as compared to October 2008 activity.

U.S. application activity was down -1.8% in November year-over-year, all ages combined. Application activity by age group showed ages 0-44 off -4.3%, ages 45-59 flat at +0.6%, and ages 60+ up a solid +6.2% year-over-year. Activity in the 60+ age group has increased steadily since March 2007. At November's close, YTD U.S. application activity was off -2.3% versus the same eleven months in 2007.

Canadian application activity was off -3.1% in November year-over-year, all ages combined. Activity by age group was flat or declining across the board: ages 0-44 off -4.5%, ages 45-59 flat at -0.5%, and ages 60+ was off -2.1% year-over-year. November's activity diminished YTD figures by a half percentage point, however Canadian application activity remains up +1.3% versus the same eleven months in 2007.

Monthly Percent Change vs. 2007 U.S. Canada Total November 2008 -1.8% -3.1% -1.9% October 2008 -2.3% +1.1% -1.8% YTD 2008 -2.3% +1.3% -1.9%

Monthly Percent Change vs. Previous Month U.S. Canada Total November 2008 -0.7% -2.2% -0.9%

About the MIB Life Index

The MIB Life Index is the life insurance industry's timeliest measure of application activity across the U.S. and Canada. Released to the media each month, the Index is based on the number of searches life member company underwriters perform on the MIB Checking Service database. Since the vast majority of individually underwritten life premium dollars in North America include an MIB search as a routine underwriting requirement, the MIB Life Index provides a reasonable means to estimate new business activity. For past releases and an email subscription visit www.mib.com/lifeindex.

About MIB Group, Inc.

MIB Group, Inc. is the premier provider of Internet-based information and knowledge services to the risk management market in North America and is a leading facilitator of electronic insurance commerce. MIB Group, Inc. companies include MIB, Inc. and MIB Solutions, Inc. (www.mib.com).

Source : here

Financial crisis will wipe out some insurance companies, predicts E&Y

Several insurance firms will fall victim to the global financial crisis, Robert Stein, global director of actuarial services for Ernst & Young, predicted today.

The industry has so far fared well in comparison to other sections of financial services because of limited exposure to the subprime mortgage meltdown and effective risk management strategies.

However, with many specialists suggesting there will be no end to difficult economic conditions in the near future, the insurance industry will not escape untouched.

Stein says there will be a need for consolidation within the industry, and warns that some smaller companies will not make it through the financial turmoil.

"Weaker companies in the insurance industry will not survive and we will see increased consolidation," Stein said, speaking on an Ernst & Young webcast titled Credit crisis and the insurance industry.

"There are issues on the banking side, of course, as to whether the rise of mega institutions is always a good thing but it's quite clear we will see the big getting bigger and with that will come an increase in complexity and risk profile. That may, perhaps, be undesired but it's part of the process of getting bigger."

But while some companies may be unable to weather the toughest economic conditions in decades, David Schieldrop, managing director at Barclays Capital, believes the situation presents "unprecedented" opportunity for some.

American International Group (AIG) plans to sell many of its subsidiaries as it looks to streamline operations. And with other companies also in distress, any firm with lots of capital could find themselves in a position to acquire a business they would not have been able to in the past – and at a knock-down price.

"This is a once-in-a-generation opportunity to acquire businesses," he said on the webcast. "The obvious example is clearly AIG as Ed Liddy has announced plans to sell a significant number of their business. There are companies there with significant market share. We really are seeing an unprecedented number of properties coming to market at a time when valuations are under severe stress. This makes for a very interesting situation.

"There is a chance for people to acquire some of the largest franchises in the industry."

Source : here

Azerbaijan Training Professional Actuaries

Azerbaijan, Baku, 22 November / Trend Capital / The second stage of the first level of actuary courses in Azerbaijan held by the United States Agency for International Development (USAID), Ministry of Finance and the Azerbaijani Association of Insurers, came to the end, the USAID said on November 22.

A ceremony to certify 13 actuaries will be held on November 24 with the participation of Paul Davis, senior economist of the USAID office in Azerbaijan, Namig Khalilov, manager of the state insurance supervision department of the ministry, Gafar Majidov, acting director of the Association of Insurers and Michael Dzi, senior trainer.

The USAID jointly with the Ministry of Finance and the association offered their assistance in the implementation of the Actuarial Education Program (AEP). The AEP will assist in increase of technical examination and professional work opportunities, directly connected to the insurance field of Azerbaijan.

The program will also offer an opportunity for six actuaries to get international level for the complete realization of the professional certification that is one of the essential requirements for Azerbaijan to enter the International Trade Organization.

Source : here

Search on for new Manulife Insurance CEO

PETALING JAYA: Manulife Insurance Bhd is looking for a new president and chief executive officer following the departure of Peter Robertson, the company’s former chief executive.

Robertson, 44, and an actuary by profession, vacated his positions as CEO and president on Nov 11 and is believed to be joining a financial services company in Britain, a source told StarBiz.

No candidate has been shortlisted and the search for Manulife Insurance’s new CEO is being intensified, according to the source.

Robertson was appointed president and CEO of Manulife Insurance in April 2006.

He graduated with a bachelor of science degree in mathematics from Kings College, University of London, in 1986, and later qualified as a Fellow of the Faculty of Actuaries in 1990.

Manulife Financial Corp, which has a 46% stake in Manulife Insurance, is the sixth largest life insurer in the world in terms of market capitalisation.

Manulife Insurance’s new business premiums last year stood at RM71.3mil against RM50.2mil in 2006. The insurer’s sales force as at September this year was 1,438 people.

The company’s net profit in 2007 was RM85mil compared with RM50.7mil previously. For the first quarter ended March 31, 2008 its net profit fell 9% to RM16.85mil.

Source : here