New app will help customers locate Biba members

Biba has launched a ‘Find a Biba Broker’ mobile app for iPhones and iPads to help customers locate Biba members and promote general insurance brokers.

The app can be used to search for Biba members by town, postcode or their current location. They can then either call or email brokers directly or retrieve directions via Google maps.

The new app is an extension of Biba’s existing online search and Find a Broker helpline which collectively receive more than 400,000 enquiries every year.

Biba chief executive, Eric Galbraith, said: “With the new signposting government agreement recognising our service as a suitable solution to help customers, we expect enquiries to increase further. It is therefore essential that members ensure that their information held is up to date.”

source from: insurancetimes

Pinsent Mason says insurers face millions in fines from rogue individuals

Firms are now being punished by the FSA without the regulator pointing to a specific breach.

UK law firm Pinsent Masons head of Corporate Governance, Martin Webster spoke after the FSA’s £3.34m fining of Mitsui Sumitomo Insurance (Europe) for “serious corporate governance failings” this morning. Former Mitsui Sumitomo Insurance (Europe) executive chairman Yohichi Kumagai was also banned and fined £119,303.

“It is clear that the FSA’s focus on corporate governance means that it is no longer a business “nice to have”.  Perceived failings can cost a business millions in fines and will also see individual directors suffer,”

“Penalties are being imposed without the need for the FSA to point to a specific breach. We are seeing the regulator increasingly acting on the basis of much woollier principles which leave less room for argument,” continued Webster.

source from: insurancetimes

The board of Canada Mortgage & Housing Corp. considered selling the home loan insurer last year, according to former Chairman Dino Chiesa, whose term ended in March. CMHC, set up in 1946 to promote home ownership, also studied the sale of Australia’s government-owned insurer and presented the findings to the Bank of Canada, according to documents released to Bloomberg News under Canada’s Access to Information Act.

The moves by the federal housing authority came as house prices in Canada continued to surge, pushing government guarantees on mortgage insurance to C$541 billion ($545 billion) at the end of September, equal to 31 percent of gross domestic product, and more than twice as much as a decade ago. Finance Minister Jim Flaherty has since questioned the need for a government-owned mortgage insurer.

“We didn’t go and price what we could sell CMHC for, but we certainly looked at the role of a national housing agency,” Chiesa said in a telephone interview.

Flaherty’s concern that CMHC poses an increasing risk to taxpayers was underscored by his efforts to tighten oversight and governance of the company in his March 29 budget, after toughening mortgage insurance rules three times since 2008. He also proposed on April 26 barring banks from using insured mortgages to back new covered bond issues.

Australian Example

CMHC analyzed Australia’s housing finance system, where the government-owned mortgage insurer was sold to the private sector in 1997. Since the 2008 credit crunch, Australian homeowners pay “relatively higher margins on their mortgages than do Canadians; the lending industry has become more concentrated and less competitive,” according to the documents obtained by Bloomberg News, which show the analysis was presented to Bank of Canada officials last June.

The Australian government sold Housing Loan Insurance Corp. to the finance unit of General Electric Co., which later spun off its insurance business to create Genworth Financial Inc. (GNW) Australia doesn’t guarantee either mortgage insurance or mortgage-backed securities.

U.S. housing prices remain 33 percent lower than they were at the start of 2006 while home prices in Canada have surged 44 percent, prompting Flaherty and Bank of Canada GovernorMark Carney to warn Canadians about taking on too much debt. Canada’s housing market will be the subject of a panel discussion at Bloomberg’s Canada Summit in Toronto today.

“Concerned”

“I have been concerned about CMHC for some time in this sense: that it’s become an important financial institution in Canada and it wasn’t subject to the same supervision,” Flaherty told reporters in Ottawa on April 26.

CMHC’s board reviewed the agency’s role “at least six times” during his seven-year tenure as chairman, said Chiesa, adding that directors have a responsibility to consider such options.

The board opted to “stay the course” for at least the “next few years,” he said. A critical look will show that CMHC should be kept “in one form or another, because of what it’s contributed,” said Chiesa, who is chairman of Leisureworld Senior Care Corp.

The process for replacing Chiesa on CMHC’s board continues, Raymond Rivet, a spokesman for the government Privy Council Office, said in an e-mail. The closing date for applications was April 23.

Doubles

The amount of mortgages insured by CMHC has risen 156 percent over the previous decade. Canada Mortgage guarantees the full value of mortgages it insures, meaning the government is liable for losses if borrowers default. Canada also guarantees 90 percent of loans insured by private companies such as Genworth MI Canada Inc. (MIC)

Besides mortgage insurance, CMHC guarantees the principal and interest on mortgage-backed securities issued by lenders through a program it manages.

Flaherty’s budget proposed allowing the country’s banking and insurance regulator, the Office of the Superintendent of Financial Institutions, to review CMHC’s books at least once a year. It would also add two government deputy ministers to the agency’s board.

Investors shouldn’t “overreact” to Flaherty’s comments about exiting the mortgage insurance business, RBC Capital Markets analysts Geoffrey Kwan and Sean Adamick said in an April 30 research note. “If it were to occur, we believe it would be unlikely to happen for a while,” they said.

Handle Exit

The government would have to address a number of questions about how to handle an exit, including whether it would raise the legal limit on private mortgage insurance of C$250 billion, the RBC analysts said.

While CMHC said in January it was rationing its mortgage insurance as it approaches its legislated C$600 billion limit, private mortgage insurers have room to grow this year, said Andy Charles, chief executive officer of Canada Guaranty Mortgage Insurance.

Canada Guaranty would like the limit raised to C$300 billion, Charles said in an April 18 phone interview. “I have a strong level of comfort that the Department of Finance monitors this.”

Flaherty would have to be careful not to sideswipe Canadian banks in exiting mortgage insurance, because loans guaranteed by the government are deemed riskless assets under international capital rules, said Neil Mohindra, a policy analyst at the Vancouver-based Fraser Institute research group.

Not Imminent

Flaherty questioned the need for a government-run mortgage insurer in an April 27 interview with the National Post newspaper. He later said any move on privatization isn’t imminent. “In the longer term, there are a number of government enterprises we review to see whether or not they need to remain within the public sector,” the minister told reporters May 1 in Kitchener, Ontario.

Governments don’t always need to intervene to promote home ownership, the International Monetary Fund said in a report published in April last year.

“Many countries in western Europe, as well as Australia, have achieved high homeownership rates without extensive government participation,” the IMF said.

Spokesmen for CMHC and the Bank of Canada declined to elaborate on their meeting last year. Part of the agency’s mandate is to “conduct research and contribute to the well- being of the housing sector by offering objective, reliable housing information,” CMHC manager of media relations Teresa Amoroso said in an e-mail.

source from: bloomberg

Buffett, Berkshire Hathaway Inc. (BRK/A)’s chief executive officer, said the $204 billion company he built with takeovers and stock picks will continue to grow and that his $34 billion purchase of Burlington Northern Santa Fe completed in 2010 “will not be the limit,” according to an interview with Bloomberg Television’s Betty Liu after Berkshire’s meeting with shareholders on May 5.

The world’s most successful investor is eyeing bigger acquisitions as Omaha, Nebraska-based Berkshire generates$1 billion a month in free cash flow, swelling the company’s cash pile to $37.8 billion. While Buffett said at the meeting that he recently passed on a $22 billion deal, Deere, the largest maker of agricultural equipment, and Henkel, the German maker of Loctite superglue, are among 24 companies similar to Burlington Northern in size that meet the takeover criteria in Berkshire’s annual report, according to data compiled by Bloomberg.

“Buffett’s problem is one we’d all like to have — he has too much cash,” Todd Lowenstein, a Los Angeles-based fund manager for Highmark Capital Management Inc., which oversees $17 billion, said in a telephone interview. “He can’t afford just to do small deals.”

Deere and Henkel have “high quality assets, dominant market share, are pretty reasonably priced,” he said. “Those meet the characteristics he’s looking for.”

Lubrizol, Burlington Northern

Buffett didn’t respond to an e-mailed request for comment sent to his assistant, Carrie Kizer.

“I wish I could make a big acquisition, because I love acquisitions when we’ve got the money,” Buffett told Bloomberg Television’s “In the Loop” program hosted by Liu. “Someday, $34 billion will not be the limit,” referring to his acquisition of Burlington Northern.

Buffett has used Berkshire’s cash pile to make at least one multi-billion dollar acquisition in each of the past two years.

He bought Wickliffe, Ohio-based Lubrizol Corp., the world’s largest producer of lubricant additives, in September for about $9 billion after saying in last year’s letter that “our elephant gun has been reloaded, and my trigger finger is itchy.” In February 2010, Buffett spent $26.5 billion in cash and stock for the 77.5 percent he didn’t already own in Fort Worth, Texas- based Burlington Northern.

The deal was Berkshire’s largest acquisition.

Acquisition Detail

Buffett usually prefers “simple” businesses with pretax profit exceeding $75 million, “consistent” earning power and “good” returns on equity while employing little or no debt, according to his annual report.

He has shifted his takeover strategy as Berkshire has grown to focus on “capital intensive businesses” such as power producers and railroads, which require consistent investment in infrastructure and equipment. So-called value investors such as Buffett also purchase companies when their stock prices are low by historical standards compared with earnings.

Using acquisitions, Buffett has built Berkshire from a failing textile maker into a holding company with more than 70 units that produce energy and chocolate, operate planes and trains, and insure against car wrecks and earthquakes.

When Buffett says he is prepared to agree to a bigger takeover than Burlington Northern, there are two dozen companies that he would like based on data compiled by Bloomberg, including Deere and Henkel.

Buffett Criteria

They have equity values of $20 billion to $40 billion; had capital expenses accounting for at least 10 percent of net fixed assets; generated an average increase in return on invested capital in the past five years that ranked in the top 50 percent; had the biggest increases in operating cash flow in that span; and sold for a lower price-earnings ratio than the average stock in their home market, data compiled by Bloomberg show.

Deere, valued at $32.2 billion, increased its return on invested capital, a measure of how profitably a company uses its debt and equity, by an average of 33 percent over the past five years, according to data compiled by Bloomberg. That’s the highest among U.S. industrial companies in the group and more than double the median return for the list, the data show.

The company also traded at 11.9 times its reported earnings yesterday, 36 percent lower than the average for U.S. equities, the data show. With analysts projecting net income will exceed $3 billion for the first time this year, Deere’s estimated price-earnings ratio will shrink to 10 times, a third less than its own five-year mean of 15.2 times, the data show.

Farmland Bet

Deere, which sold $24 billion of agricultural equipment last year, said in February that sales of its signature green and yellow farm, forestry and construction machines outside the U.S. and Canada will help boost revenue to $50 billion by 2018.

Buffett said yesterday that over the next 100 years, farmland will beat gold, which surged to a record in 2011 after increasing more than sixfold in the past decade.

With Deere, “the valuation metrics are Buffett-like,” Keith Wirtz, who oversees $15 billion as chief investment officer at Fifth Third Asset Management in Cincinnati, said in a telephone interview. “Traditionally, Buffett has been attracted to those entities that have strong brand identity.”

Deere is a company with “iconic brand identification.”

Ken Golden, a spokesman for Deere, didn’t immediately return a telephone call or e-mail seeking comment on whether the Moline, Illinois-based company has been approached by Buffett or would consider putting itself up for sale.

Airplane Glue

Henkel, which supplies glues for Airbus SAS’s A380 superjumbo plane, is the world’s biggest maker of adhesives and sealants with almost a 40 percent share globally, according to data compiled by Bloomberg.

The 21.7 billion euro ($28.3 billion) company, which is controlled by the Henkel family and based in Dusseldorf, could appeal to Buffett because its business is difficult to replicate and will profit as demand in the aerospace industry picks up, according to Peter Sorrentino, a fund manager who helps oversee $14.7 billion at Huntington Asset Advisors in Cincinnati.

Net new orders for commercial aircraft climbed to a four- year high of about $200 billion in 2011, according to data compiled by Bloomberg.

Henkel said in March that it is “confident” of reaching financial targets for 2012 and analysts now project its cash from operations will rise to a record on a per-share basis, the data show. In the past five years, the company’s average annual growth in operating cash flow was almost double the median for non-financial companies in the Stoxx Europe 600 Index. (SXXP)

Good Fit

While Henkel has since rallied to the highest price in at least two decades, the stock still sells for less relative to earnings than the average German company, which was valued at almost 20 times profit yesterday, the data show.

“That one would fit” Buffett’s criteria, Huntington Asset’s Sorrentino said in a telephone interview. “They are very unique. The aerospace cycle is really kicking in the high gear with commercial aircraft replacements.”

Lars Witteck, a spokesman for Henkel, didn’t immediately return an e-mail sent after normal office hours seeking comment.

Cummins Inc. (CMI) would also be attractive to Buffett as a well- known brand with a foothold in some of the fastest-growing overseas markets and an easy-to-understand business, according to Walter Todd, who oversees $950 million as chief investment officer at Greenwood Capital in Greenwood, South Carolina.

The Columbus, Indiana-based maker of portable generators and diesel engines gets about 20 percent of sales from China, Brazil and India and will post record sales and earnings this year, analysts’ estimates compiled by Bloomberg show.

Relative Value

Cummins traded at 11.1 times earnings yesterday, a more than 40 percent discount to the average U.S. company, according to data compiled by Bloomberg. Analysts estimate that its operating cash flow this year will more than triple on a per- share basis from five years ago.

“You could say it’s pretty cheap,” Todd said in a telephone interview. Cummins has “very good exposure to world economic growth and other geographies overseas.”

Janet Williams, spokeswoman for Cummins, declined to comment on whether the $20.3 billion company has been approached by Buffett or would consider putting itself up for sale.

Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, says one risk that Buffett faces in doing bigger deals is the potential cost on Berkshire’s credit rating.

Berkshire lost its last remaining AAA credit rating in February 2010 with its cash-and-stock purchase of Burlington Northern, after Standard & Poor’s cut the company to AA+.

Elephants and Peanuts

Buffett has also maintained Berkshire’s cash level at more than $20 billion to guarantee liquidityand told investors on May 5 the $22 billion deal that he stepped away from would have required Berkshire to sell securities he would prefer to keep.

To pay for a $30 billion deal entirely in cash and still have $20 billion remaining, Berkshire would have to add more than $12 billion to its current cash holdings.

“You’ve got to deal with the reality that the company is big enough that in order to do anything of significance in investing cash flow, they often have to do the mammoth deals that require moves that may be damaging shorter-term to the credit ratings or perhaps even the value of the stock,” KeyCorp’s McCain said in a telephone interview.

Smaller transactions may not do enough to benefit Berkshire investors. At the shareholders’ meeting, Buffett said his investments in Goldman Sachs Group Inc. (GS) and General Electric Co. (GE) in 2008, worth about $8 billion combined, were “peanuts.”

Moving the Needle

With Berkshire’s operations throwing off about $1 billion in cash after capital expenses, Buffett could still accumulate enough money in a year to consider an acquisition as large as his takeover of Burlington Northern, the data show.

“He has the cash,” said Tim Ghriskey, who oversees about $2 billion as chief investment officer of Solaris Group in Bedford Hills, New York. “If the opportunity is there, a larger acquisition can really impact Berkshire. Smaller acquisitions aren’t going to really move the needle.”

List of Companies:
Market Capitalization from $20 Billion to $40 Billion
Capital Expenditures / Net Fixed Assets > 10%
5-Year Average Growth in ROIC in Highest 50%
5-Year Average Operating Cash Flow Growth in Highest 50%
P/E Ratio < Average Company Value in Home Market
*Excludes Banks, Brokerages, Asset Managers, Technology,
Biotechnology Companies

Apache Corp.
Covidien Plc
Cummins Inc.
Deere & Co.
Deutsche Post AG
Dominion Resources Inc.
Goldcorp Inc.
Henkel AG
ITC Ltd.
Kia Motors Corp.
Kumba Iron Ore Ltd.
McKesson Corp.
Mosaic Co.
Newmont Mining Corp.
NovaTek OAO
OAO GMK Norilsk Nickel
Potash Corp. of Saskatchewan
Prudential Plc
PT Astra International
SAIC Motor Corp.
Sasol Ltd.
Seven & I Holdings Co.
Softbank Corp.
Tyco International Ltd.

source from: bloomberg

Former boss Halstead leaves after 25 years for personal reasons

AXA Commercial Lines has announced the appointment of Karen Osborne to manage its Leeds branch.

Osborne replaces Andy Halstead who has left the business after 25 years for personal reasons.

Managing director intermediary Matthew Reed said: “I am genuinely disappointed at Andy’s decision but understand his reasons and wish him every success in the future. I want to thank him for his outstanding job in developing the team in Leeds. The branch is in great shape and delivering fantastic numbers.”

He continued: “I’m delighted that we have Karen lined up to take over where Andy has left off. She has invaluable insight into how AXA’s commercial lines brokers operate and hands-on experience of managing a branch. I’m sure that many of our brokers will be really pleased to see her back at the coalface.”

Osborne’s career at AXA spans some 10 years during which time she had a number of roles including regional director and head of intermediary and partner experience. For the past year she has led the strategic projects team.

source from: insurancetimes

New offering will help businesses with material damage and business interruption claims

Legal expenses insurer, the DAS Group, has launched a new product to help business with submitting material damage and business interruption claims.

Loss Assist Insurance from DAS offers the client a complete personal service from the moment the loss is reported through to settlement by their insurer.

DAS Group chief executive Paul Asplin (pictured) said: “Whilst our core business will always be legal expenses insurance the future of the DAS Group also includes a number of plans that will see the Group diversify beyond this. We intend to consolidate on our strong position in the UK market and the growth that we have achieved by exploring new lines of business.”

He continued, “In the UK there can be a gap in the support that businesses enjoy compared to their counterparts in Europe and other parts of the world, where clients are provided with cover under their commercial insurance policies for the fees needed to give them technical and practical support to get their claim paid quickly and fairly.

“Major losses can be very damaging to any business. There is a tremendous burden on the business to prepare what are very complex claims whilst striving to maintain as normal a business operation as possible. Our new product takes a lot of this burden away from both the client and their broker by providing high quality, professional, support throughout the entire claim process allowing them to concentrate on what they know best, namely running their business.

“We have engaged the services of John Sims in the development of Loss Assist. John’s experience from Chubb Masterpiece and, more recently, as CEO of Lorega, has and will be invaluable to its success.“

The DAS Loss Assist policy provides cover including professional fees up to £100,000 for any one loss. All clients being visited within 24 hours of the claim being notified.

DAS has entered into partnership with national loss adjusters, the Davies Group, for the provision of loss adjusters, surveyors, and project managers in the industry.

Industry expert John Sims said: “I am delighted to be working with DAS. They are a company committed to service and have a great track record in the UK market. They have wonderful relationships with brokers and insurers alike. Loss Assist Insurance is still a relatively new concept and there are tremendous opportunities to grow.

“It’s just a fact of life that in today’s economic climate that businesses need much more help, and on an increasingly specific technical level, to get back on their feet than used to be the case.”

source from: insurancetimes

Business will be split between other branches

Gallagher has closed the retail part of its Norwich office, resulting in five redundancies.

The retail clients originally dealt with in Norwich will now be serviced from Gallagher’s Brierley Hill, Ipswich and London branches.

Elsewhere, Gallagher’s Leeds office has stated plans to increase its annual income from £25m to £50m.

Gallagher declined to comment.

source from: insurancetimes

Ex-Atradius UK commercial head joins QBE

QBE Trade Credit has appointed Ian Bocca to manage its UK new business development business.

The former head of commercial for Atradius UK will be responsible for the development of new trade credit business in the UK.  

Trevor Williams, Head of Credit & Surety Europe, said: “Ian is a very well known senior figure in UK trade credit insurance and brings a wealth of experience to this role from over 30 years in this market.

“This appointment further demonstrates our commitment to the trade credit market and our desire to explore new opportunities and to profitably grow our business.”

Bocca has also previously worked as head of new business for credit insurer Euler Hermes UK.

source from: insurancetimes

Insurance Times ranks UK general insurers on financial performance

The results are in, the numbers have been crunched and Allianz has triumphed in Insurance Times’ first annual results ranking.

Allianz’s consistently strong performance, with COR below 100% in each of the past five years, helped it to come out on top. RSA in second place and Admiral in third were also boosted by their solid historical results.

The top-ranking insurers table compares the financial performance of the UK’s leading insurers using four different COR measures, balancing short-term performance with a longer-term view (see methodology, below).

In joint fourth place were Aviva, AXA, and Zurich, followed by Ageas in seventh position, and LV= and RBSI in joint eighth. Ageas, LV= and RBSI were all noted for their exceptional turn-around performances during 2011.

The nine insurers featured represent the UK’s largest and most influential insurers for which financial results are publicly available.

Table: Insurers ranked by improvement to COR 2010-11

source from: insurancetimes

AXA unveils academy for commercial underwriters

AXA Commercial Lines has announced the launch of its joint underwriting academy programme with the Chartered Insurance Institute (CII).

This is the second of four planned professional skills academies to cover all four core parts of the business, including sales, underwriting, claims and people management. 

It follows the launch of its sales academy last October and is aimed at the professional development of AXA Commercial Lines’ staff in line with its Chartered Insurer status.

AXA Commercial Lines chief executive Amanda Blanc, said: “I’m proud of our new academies. Developing our people and creating a dynamic, exciting culture are central to my strategy for AXA Commercial Lines.

“The launch of the new underwriting academy gives us a renewed focus on supporting our underwriters in becoming the best in the industry.”

The AXA Claims and People Management Academies will launch later this year.

source from: insurancetimes