An exploration into the world of IGP and multinational pooling...

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1 An exploration into the world of IGP and multinational pooling IGP Regional EMEA Employee Benefits Seminar Windsor (UK), 24 May 2016 Bartosz Racino, Senior Account Representative This presentation was exclusively prepared for the Seminar None of the contents of this presentation may be copied or disclosed to any other party or used for any other purpose than the one mentioned above without IGP's prior written permission. The information in this document does not constitute financial advice and is subject to change. Please contact your IGP Account Manager or for more details.. IGP Network Partners operating outside of the United States are not licensed in or authorized to conduct insurance business in New York. The policies or contracts issued by a Network Partner to contract holders abroad are not protected by the New York State guaranty funds, such policies or contracts have not been approved by the New York Superintendent and may not be subject to the laws of New York. International Group Program

2 Key Topics IGP Multinational Pooling The IGP System Going Forward Win-Win Introduction to IGP with historical background, organisation and key figures International Group Program

3 Introduction to IGP Historical Background 3

4 Introduction to IGP Historical Background 4

5 Introduction to IGP In many countries, the largest insurance companies in the world are IGP partners 5

6 Introduction to IGP In the other countries, IGP partners with the top players in the market 6

7 IGP Portfolio Key April 30, Total annual premium: close to 1.6 billion USD 10 captive arrangements in force Now No of Parents No of Units 7

8 Introduction to IGP Market Share Data - Annual Survey Run via Deloitte 12/31/2014 results reconfirm IGP as one of the largest networks: 25% 27% 22% Multinational Pooling Clients: 27% Pooled Subsidiaries: 25% multinational pooled subsidiaries premium pooling clients Pooled Premium: 22% 8

9 Key Topics IGP Multinational Pooling The IGP System Going Forward Win-Win What is multinational pooling? International Group Program

10 Introduction to Pooling What is Pooling? What is Pooling? Combining... the financial results... of a multinational company s local employee benefit plans in multiple countries... into a pool of contracts... for international experience-rating purposes Accounting procedure which optimizes the financial efficiency of insured programs globally 10

11 Introduction to Pooling What is International Experience Rating? Making a profit and loss account... for employee benefit contracts... across two or more countries... Chile UK Spain Australia Taiwan 11

12 Introduction to Pooling What can be pooled? Most insured group employee benefits Death Disability Medical Insured pension 12

13 Introduction to Pooling Multinational Employers Needs Challenges for corporations: Differences in: Customs Legislation Social security Lack of information resulting in: Lack of management guidance & supervision Lack of cost effectiveness 13

14 Introduction to Pooling Multinational Employers Needs Cost Savings Service Management Control Information Tax Effectivess Multinational Pooling Meets Multinational Employers Needs 14

15 Key Topics IGP Multinational Pooling The IGP System Going Forward Win-Win Why is IGP your best choice? How does it work in IGP, including types of products and examples. International Group Program

16 IGP Meets Employers Needs Cost-Savings 16

17 The IGP System First & Second Stage Accounting First Stage Accounting Second Stage Accounting Local Level No pooling Preserves the terms & conditions of the local insurance contract Separate local contracts continue to exist Benefit levels are unaffected Takes advantage of a multinational company s worldwide size Achieves economies of scale Reduces risk charges No implementation charges 17

18 The IGP System What Happens to the Premium the Subsidiary Pays? 18

19 The IGP System Local (First) Stage Accounting Example: Country A Group Term Life contract Number of Lives Insured 1,000 Premium 200,000 Claims 120,000 Local Dividend 16,000 Commissions 20,000 Premium, claims, commissions, local dividend etc. are paid in local currency. For IGP reporting purposes, these amounts are converted to US Dollars. 19

20 The IGP System Second Stage Accounting (SSA) Country A FSA (Local Conditions) Country A SSA Number of lives 1,000 1, Premium 200, , Claims 120,000 (60%) 120,000 (60%) 3. Local Dividend 16,000 (8%) 16,000 (8%) 4. Commissions 20,000 (10%) 20,000 (10%) 5. Expenses & Risk 44,000 (22%) 30,000 (15%) 6. Balance ( ) 0 14,000 (7%) 20

21 The IGP System Second Stage Accounting in Two Countries Country A SSA Country A SSA Country B SSA Number of Lives 1, Premium 200, Claims 120, Local Dividend 16, Commissions 20, Expenses & Risk 30,000 1, ,000 50, ,000 30,000 16, ,000 4,000 27,000 9, Balance ( ) 14,000 17,000 7,000 21

22 The IGP System Second Stage Accounting in Three Countries Country A Country B Country C Total Number of Lives 1, , Premium 200,000 50, , , Claims 120,000 30,000 85, , Local Dividend 16, , Commissions 20,000 4,000 2,400 26, Expenses & Risk ( ) 6. Balance ( ) 25,000 8,500 15,600 49,100 19,000 7,500 17,000 43,500 International Dividend 22

23 The IGP System Second Stage Accounting Principles Parent Company International Dividend Margin Country A Margin Country B Margin Country C 23

24 The IGP System SSA (Second Stage Accounting) in Three Countries High Claims Country A Country B Country C Total Number of Lives 1, , Premium 200,000 50, , , Claims 120,000 30, , , Local Dividend 16, , Commissions 20,000 4,000 2,400 26, Expenses & Risk ( ) 6. Balance ( ) 25,000 8,500 15,600 49,100 19,000 7,500-13,000 13,500 International Dividend 24

25 The IGP System SSA in Three Countries - Very High Claims Country A Country B Country C Total Number of Lives 1, , Premium 200,000 50, , , Claims 120,000 30, , , Local Dividend 16, , Commissions 20,000 4,000 2,400 26, Expenses & Risk ( ) 6. Balance ( ) 25,000 8,500 15,600 49,100 19,000 7, , ,500 Loss Carried Forward 25

26 The IGP System Second Stage Accounting Principles Parent Company International Dividend Margin Country A Margin Country B Deficit Country C 26

27 The IGP System Second Stage Accounting - IGP Principles International Dividend Multinational Parent Company Parent Subsidiary Relationship Second Stage Accounting First Stage Accounting Pooling Agreement (Application Form) Colombian Subsidiary Broker MAPFRE Thailand Subsidiary Muang Thai IGP (John Hancock USA) Ireland Subsidiary Broker Irish Life Local Group Insurance Contract Agreement of Reinsurance & Pooling 27

28 Introduction to IGP Arrangements for Any Size Account Loss Carried Forward (LCF) Overall financial result: Positive: Dividend paid. Negative: Resulting loss carried forward A unit s loss will be carried forward for max. 5 years Full Stop Loss Overall financial result: Positive: Dividend paid. Negative: Resulting loss waived Different levels possible Small Groups Pool (SGP) Overall financial result: Positive: SGP dividend paid Negative: Resulting loss will not be carried forward in client s account Available for < 1,000 lives No risk exposure Captive Reinsurance Risk borne by Captive Risk ceding only Risk ceding & premium transfer IGP Subsidiary Pool Solution if parent company does not have an IGP pool Participants experience is combined and then included in the Small Groups Pool 28

29 The IGP System IGP Small Groups Pool $ $ $ $ $ $ 29

30 The IGP System Small Groups Pool Some facts & figures 9/30/2015): Oldest and largest of its kind in the world Around 245,000 employees >1,600 subsidiary contracts >$330 million premium Last 5 year average result ( ): 13.94% of each client s positive experience has been paid back as International Dividend 30

31 IGP Meets Employers Needs Service International Group Program 31

32 Key Topics IGP Multinational Pooling The IGP System Going Forward Win-Win Where do we go from here? How can we help you? International Group Program

33 Going Forward... Future Cooperation International Group Program 33

34 Going Forward Different Steps to Take Benefits & Pooling Strategy Informing the Subsidiaries & IGP Local meetings and proposals Plan Implementation & Pool Expansion International Group Program 34

35 Going Forward... How can IGP help you? Material to facilitate your communication: IGP Country Profiles The Local Perspective Poolable & Non-poolable coverages in IGP Sample letters to introduce the IGP Network Partner to your local management to accompany the IGP proposal employee benefits questionnaires International Group Program 35

36 Key Topics IGP Multinational Pooling The IGP System Going Forward Win-Win A win-win situation for all parties involved International Group Program

37 Your Benefits Mean the World to Us! IGP Pooling Your Best Choice: The expertise and know-how of an industry leader We are where you are Financially solid, reliable and market-leading partners Pro-active account management Efficient and high-quality reporting and information Diverse and extensive product portfolio Arrangements for any size account Solutions available for TCNs and Expatriates International Group Program 37

38 IGP Pooling: A Win/Win Situation For Multinational Corporations Cost-Savings: Contracts can generate a potential International Dividend to be shared with the multinational client Plan surplus can be paid to local subsidiary Important savings possible from well-managed pool Information Effective global benefits management Centralized annual accounting Cash flow International Group Program 38

39 IGP Pooling: A Win/Win Situation For the IGP Network Partners Protection for the Network Partner through reinsurance Reputation of an international player Major distribution channel (access to new business opportunities) Better retention of clients (increased customer loyalty) Exchange of knowledge New product development International Group Program 39

40 Key Topics We Discussed IGP Multinational Pooling The IGP System Going Forward Win-Win Introduction to IGP with historical background, organisation and key figures What is multinational pooling? Why is IGP your best choice? How does it work in IGP, including types of products and examples. Where do we go from here? How can we help you? A win-win situation for all parties involved International Group Program

41 Questions & Answers International Group Program

42 Contact Info Bartosz Racino John Hancock / IGP Europe Senior Account Representative bartosz.racino@igpeurope.com International Group Program