Survey of Asset Managers Identify Top Mistakes by Insurance Companies

The survey by the Insurance Asset Outsourcing Exchange has suggested that insurance companies should provide a better description of investment needs up front in the RFP, among other recommendations, and created a list of best practices.

(January 12, 2011) — A recent survey of insurance asset managers has noted the top mistakes insurance companies make, providing recommendations on how to avoid them.

The most frequently cited suggestion for insurance companies: Provide a better description up front in the request for proposal (RFP).

David Homes, a partner at strategic consulting firm Eager, Davis & Holmes and Research Director for the Insurance Asset Outsourcing Exchange, has been tracking insurance companies and their relationships with investment managers since the early 1990s. “An important part of the RFP document is the description of the insurance company’s investment needs and expectations associated with the mandate being outsourced,” he noted in a statement. “Getting a good understanding at the beginning of the RFP process helps focus investment managers’ response toward specific needs and can improve the likelihood that an insurance company will identify the best investment manager for a specific situation. Unfortunately, this part of the RFP document is often underdeveloped.”

Survey respondents added that insurance firms could better communicate a clear timeline for the RFP process, and they identified a minimum of thirty days as reasonable.

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Additional findings showed insurance companies are increasing their use of investment consultants. “Because investment consultants typically use RFPs in the search process, they are contributing to the trend (of increased RFP use),” explains Holmes. “The manager selection process is evolving to meet insurance companies’ investment needs, which are more complex than just a few years ago.”

The survey was conducted by the Insurance Asset Outsourcing Exchange and is based upon the responses of 14 leading insurance asset managers.

A report last month by the same firm showed investment managers are also seeing an increase in the number of requests for proposals (RFPs) from insurance companies seeking third party services as the manager selection process evolves to meet increasingly complex investment needs. Holmes noted that he has seen that the insurance selection process has become more structured yet also more complex as investment needs have grown, adding that the increase in the activity of RFPs reflects the heightened proclivity among insurance firms to outsource management.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

The bank has formed a deal with Paternoster, acquiring all of the shares in the pension insurer to nearly double Goldman's $4.7 billion insurance business in the UK.

(January 12, 2011) – Goldman Sachs’s insurance arm Rothesay Life has formed a deal with the pension buyout specialist Paternoster.

The deal reflects a desire by Goldman to gain access to liquidity as well as pension risk and assets, reflecting a renewed commitment by the US bank to the pensions buyout venture it launched in 2007. Some industry analysts have asserted that the bank’s purchase may be a sign of market recovery.

Goldman Sachs noted that Rothesay Life, its existing insurance subsidiary, and Paternoster would be handled as separate insurance companies in the short-term. In the long-term, however, the bank expressed plans to eventually combine the two, subject to regulation.

Goldman Sachs paid $407 million for the pension insurer, nearly doubling Goldman’s $4.7 billion insurance business in the UK. Paternoster is now a 100%-owned subsidiary of Goldman Sachs, and the acquisition of Paternoster provides the bank with a book worth $4.7 billion in addition to the more than $6 billion of deals it has already signed.

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“This is not a deal aimed at making cost savings,” said Rothesay’s chief executive Addy Loudiadis to Financial News. It is a deal aimed at doubling our book of business and positioning us for further growth.” Loudiadis added that the deal offers an opportunity for Rothesay to mature by doubling the company’s size and capabilities.

The Paternoster board announced that it “believes that this transaction would create an excellent combination to exploit the opportunities in the growing bulk annuity market and enhance the long term security of its policyholders.” Rothesay is now targeting about $16 billion of assets under management – expansion that could come in the form of further acquisitions or through two more large deals, the Financial Times reported. With deals for British Airways and RSA, the insurer, Rothesay has completed some of the largest longevity trades in the UK.

The completion of the Goldman deal with Paternoster comes just a month after it was first announced.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742