Insights 2011 EEV/MCEV

Transcription

1 May 2012 Insights 2011 EEV/MCEV Stable reporting amidst uncertainty The 2011 life insurer reporting season has shown a continuing place for supplementary reporting, including EV and related metrics, as well as IFRS profit drivers. Results in certain markets were impacted by the Eurozone sovereign debt crisis, low interest rates and increases in credit spreads. In this publication, we review the year-end 2011 embedded value (EV) and related supplementary metrics published by life insurers who reported under either the European Embedded Value Principles (EEV Principles) or the European Insurance CFO Forum Market Consistent Embedded Value Principles (MCEV Principles, copyright Stichting CFO Forum Foundation 2008). Nearly all companies publishing under either the EEV or the MCEV Principles at year-end 2011 followed a similar basis of preparation (whether EEV or MCEV Principles) and a similar methodology as at year-end Table 01 sets out the number of companies reporting under the EEV Principles and the MCEV Principles as at year-end 2011 and prior year-ends. The changes in numbers from year-end 2010 to 2011 are due to two companies converting from EEV to MCEV Principles, three companies not publishing 2011 EEV results, two companies reporting an EEV for the first time, three companies publishing year-end 2011 EEV/ MCEV by the end of May (having published year-end 2010 EEV/MCEV after May) and two companies which published year-end 2010 EEV before the end of May not having published at the time of writing. Four of these five new inclusions are Japanese insurers which brings the total number of Japanese publications to ten. A proportionate breakdown of the approach to allow for risk is provided in the table for companies reporting under the EEV Principles. We only consider EEV/MCEV Principles reporting here, but EV reporting on a traditional basis is widely used in a number of other markets such as the Far East, South Africa and Canada. Further details of the 2011 EEV and MCEV publications by company are provided in the Appendix. In the remainder of this edition of Insights, we: Describe the methodology followed by market-consistent reporters for year-end 2011 publications. Describe the supplementary disclosures provided by life insurance companies. Briefly describe recent financial and regulatory reporting developments affecting insurance companies. Consider the potential future role of supplementary reporting. Table 01. Summary of approach to allowing for risk companies reporting EEV/MCEV 1 MCEV Principles Reporting under the EEV Principles 2 Total Total Top-down Market-consistent Other Indirect Direct End 2011 reporting % 8% 68% 4% End 2010 reporting % 11% 64% 4% End 2009 reporting % 12% 64% 4% End 2008 reporting % 17% 60% 3% End 2007 reporting N/A 34 20% 18% 56% 6% End 2006 reporting N/A 35 26% 17% 46% 11% End 2005 reporting N/A 21 33% 24% 24% 19% End 2004 reporting N/A 5 80% 20% 0% 0% 1 Includes both CFO Forum and non-cfo Forum companies publishing by the end of May. 2 For a description of these approaches, see our May 2008 Update 2007 EEV: Stable accounting in volatile markets.

2 Market-consistent methodology A summary of the methodology for the 16 companies reporting under the MCEV Principles and the 19 companies reporting under the EEV Principles using a market-consistent approach is provided in this section. In many areas there has been little change from year-end Reference rate (including illiquidity premium) Table 02 summarises the reference rate approach used by these 35 companies as at year-end 2011, which, for almost all of these companies, is the same approach used as at year-end The approach used in deriving the illiquidity premium has generally remained similar to the previous year. For some companies the divergence in sovereign debt yields across the Eurozone during 2011, due to the Eurozone sovereign debt crisis, materially impacted the results. At year-end 2011, one company based the reference rate for some of its Eurozone business on local sovereign debt yields meaning that for all other companies the valuation of the liabilities was not directly impacted. Five companies did, however, include a sensitivity where the reference rate was based on the ECB AAA and Others yield curve (a hybrid sovereign debt curve). The CFO Forum had announced in December 2011 that: Including an allowance for the current sovereign debt market conditions as a component of the reference rate in embedded value reporting or disclosing a sensitivity as supplementary information of reported embedded value to such parameters where it is deemed appropriate would represent an initial step towards the expected convergence of MCEV with the developing European regulatory regime (Solvency II) on this matter. Of the 35 companies publishing under a marketconsistent approach, 15 applied an illiquidity premium (all European headquartered companies). Of these 15, 10 applied a method in some aspects similar to that prescribed in the Solvency II fifth Quantitative Impact Study (QIS 5), published on 5 July Three specific aspects in calibrating the illiquidity premium are as follows: 1. Assessing the illiquidity risk premium within yields on illiquid assets. The QIS 5 approach uses the following formula to measure the level of illiquidity risk premium in illiquid assets: Illiquidity premium = max[0, 50%*(Spread-40bps)] 2. Determining for which products an illiquidity premium can be included within the valuation and what proportion of the illiquidity risk premium to Table 02. Reference rate approach for market-consistent publications, year-end 2011 EV MCEV Principles apply. QIS 5 applies a bucket approach, allocating 50%, 75% or 100% of the illiquidity premium to specified product categories, depending on the product features. 3. Determining over what period the illiquidity premium applies. The QIS 5 approach applies the illiquidity premium additively to the basic swap curve up to cut-off points (defined by currency) at which point the addition applied to the swap curve is reduced linearly to nil over the next five years. Table 03 describes in more detail the reference rate approach taken by CFO Forum companies. It shows that of the nine companies allowing for an illiquidity premium, seven adopted the QIS 5 formula to measure the asset illiquidity risk premium at year-end These seven did not all calibrate to the same illiquidity premium, with material differences arising due to the use of divergent source data which were affected differently by widening Eurozone sovereign debt yields. Of the CFO Forum companies, six applied the illiquidity premium to different product categories using a similar method to the bucket approach used in QIS 5 but with some modification in most cases, for example, using 0% for unit-linked products instead of 50%. Of course since QIS 5 there have been more recent developments under Solvency II in relation to the economic assumptions. It remains to be seen how these Solvency II developments impact future embedded value bases. Although neither the EEV nor MCEV Principles require the publication of illiquidity premium sensitivities, 14 of the 35 market-consistent companies published a sensitivity at year-end 2011 (15 of 34 as at year-end 2010). These 14 companies included some which did not include an illiquidity premium within their main EEV/MCEV results. The published sensitivity varies, with six EEV Principles Swaps 5 8 Swaps / swaps plus illiquidity premium 1,2 6 2 Swaps plus illiquidity premium Government bonds 1 5 Government bonds / government bonds plus illiquidity premium 2,3 1 1 Other A small number of companies following this approach applied swaps less 10bps, not swaps. 2 An illiquidity premium is applied for some, but not all, lines of business. 3 One company defines its reference rate, pre-illiquidity premium, as government bonds + 10bps. 2 towerswatson.com

3 Table 03. Summary of reference rate calibration approaches CFO Forum market-consistent publications only, year-end 2011 EV Company EEV or MCEV Principles Reference rates Ageas EEV P Swaps less 10 bps, increased by illiquidity premium calibrated in line with CFO/CRO Forum recommendations to EIOPA and applied to products in 100%/75%/50% buckets. Ageas uses a weighted average illiquidity premium for each insurance company based on their liability mix, of 71 bps in UK, bps in Eurozone, 70 bps in the US and 54 bps in Hong Kong. Allianz MCEV P Swaps less 10 bps, plus illiquidity premium where the illiquidity premium is calibrated using the QIS 5 formula. The 100% illiquidity premium adjustments (relative to swaps) are 118 bps in Eurozone, 103 bps in the US, 24 bps in Switzerland and 35 bps in the Czech Republic. No illiquidity premium is applied to unit-linked and variable annuity business, and 75% illiquidity premium is applied to all other business. For Korea, government bond yields with no illiquidity premium are used. Aviva MCEV P Swaps, increased by an illiquidity premium for certain contracts. The illiquidity premium calibration is based on the QIS 5 formula. For immediate annuity type contracts an increase of 130 bps in the UK, 118 bps in France and 88 bps in Spain. For US business the illiquidity premium is 133 bps for immediate annuities and 113 bps for all other contracts. AXA EEV P Swaps, increased by illiquidity premium calibrated using the QIS 5 formula. The 100% illiquidity premium adjustments are 132 bps in UK, 108 bps in the Eurozone, 90 bps in US, 81 bps in Hong Kong and 25 bps in Switzerland. No illiquidity premium is applied to unit-linked and variable annuity business; other products are allocated to 100%/75%/50% buckets. CNP MCEV P Swaps less 10 bps, plus illiquidity premium for certain products. Illiquidity premium calibrated using QIS 5 formula and amounts to 108 bps (relative to swaps) for French business. Different proportions of this illiquidity premium are allocated to different categories of contracts, with 79 bps applied to Euro savings and retirement business, 49 bps to unit-linked savings and either 79 bps or 49 bps to other products. For Italy, Portugal and Spain local government bond yields with no illiquidity premium are used. For Brazil a traditional embedded value method is used. Generali EEV P Swaps, increased by illiquidity premium calibrated and applied to products in line with the QIS 5 approach. The 100% illiquidity premium adjustment is 135 bps in the UK, 118 bps in Eurozone, 102 bps in the US and 25 bps in Switzerland. For the Czech Republic and Israel government bonds are used. Hannover Re MCEV P Swaps, unadjusted. Munich Re MCEV P Swaps, unadjusted. Prudential EEV P MCEV approach used for UK annuities only: reference rate set to swaps plus 135 bps for in-force business and swaps plus 104 bps for new business. SCOR MCEV P Swaps, unadjusted. Standard Life EEV P Reference rate for UK business set to 1.93% based on government bonds. For UK annuities that are level or subject to fixed escalations the investment return is set to 4.20%. Zurich MCEV P Swaps, plus illiquidity premium for certain products. The illiquidity premium is based on the QIS 5 formula and was 61 bps in Eurozone, 90 bps in the US, 132 bps in the UK and between 21 bps and 25 bps in Switzerland. 100% of the illiquidity premium is applied for annuities, 75% for contracts with participating features, universal life contracts and fixed interest annuities in the US, and 0% for all other lines of business. companies illustrating the impact of removing the illiquidity premium entirely (five at 2010) and eight companies showing the effect of a 10 bps increase in the illiquidity premium (nine at 2010). At year-end 2011, five companies disclosed that they adopted the QIS5 approach to extrapolation of the swap curve, with most other companies not disclosing the approach used. End-period implied volatilities Of the 35 companies, all those who disclosed their approach at year-end 2011 used end-period implied equity option and swaption volatilities (as was the case at year-end 2010), with the exception of one company that used an end November calibration and then adjusted the result to reflect the change in the market between end November and end December. Non-hedgeable risks The EEV Principles require that sufficient allowance is made for the aggregate risks in the business but do not provide further explicit guidance on the allowance for non-hedgeable risks (NHR). In contrast, the allowance for NHR is covered in a number of areas of the MCEV Principles, described further in our May 2010 Insights 2009 EEV/MCEV Greater consistency, challenges remain. The MCEV Principles require that sufficient disclosures are provided to enable a comparison to a cost of capital methodology. Table 04 provides summary statistics for the equivalent cost of capital charge disclosed in the 16 MCEV Principles publications at year-end 2011 and also the 2009 and 2010 publications, showing little change between the years. Table 04. Equivalent annual cost of capital charge for NHR for MCEV Principles publications Year Minimum Lower quartile Median Upper quartile Maximum % 2.5% 3.3% 4.0% 7.0% % 2.5% 2.9% 4.0% 7.0% % 2.5% 2.8% 4.4% 7.0% towerswatson.com 3

4 Supplementary disclosures In recent years, a number of life insurers have expanded the supplementary information to reflect a range of metrics used in strategic decision making and/or to provide additional insights. This section describes year-end 2011 practice, covering both compulsory disclosures required by the EEV/MCEV Principles and additional voluntary disclosures. Compulsory EEV/MCEV disclosures Required disclosures include the balance sheet (accompanied by a reconciliation to IFRS or other consolidated GAAP equity), the analysis of earnings (or movement), the value of new business (VNB), and the sensitivities. This set of information can help provide the basis for indicating the components of value, understanding a company s risk exposures, understanding required capital flows and assessing risk-adjusted targets and performance. The MCEV Principles prescribe the format for presenting the analysis of earnings in Appendices A and B of that document. Appendix A requires that the MCEV movement is split between free surplus, required capital and the value of in-force business, thereby highlighting the capital generation of in-force business and the capital strain of new business. Appendix B, the Group MCEV analysis of earnings, requires a combined analysis of covered business MCEV and non-covered business IFRS results to be shown. At year-end 2011, 15 of 16 MCEV Principles publications included an Appendix A analysis of MCEV earnings and 8 of the 16 publications included an Appendix B analysis of Group MCEV earnings. There were a number of EEV Principles publications at year-end 2011 which included information similar to the Appendix A analysis of earnings. Voluntary disclosures In recent years, a number of life insurers reporting EEV/MCEV results have expanded the supplementary information provided to users, to include additional information such as: The timing of the emergence of future statutory (regulatory) distributable profits. The new business internal rate of return, which provides the user with an indication of the expected reward given the capital invested. The new business payback period, which helps stakeholders understand how long it takes before capital employed in writing new business is expected to be returned. Details of how the new business metrics are typically calculated can be found in our May 2011 Insights Focus on value and cash flow. Practice varies across the industry particularly as to whether the projected profits underpinning these metrics are calculated on a real-world economic basis (i.e. including expected investment risk premia) or a risk-neutral basis (excluding expected investment risk premia). Figure 01 summarises the number of companies (of the 41 publishing EEV/MCEV at year-end 2011) publishing these supplementary metrics at year-ends 2011, 2010, 2009 and The general trend has been an increase in disclosure of these metrics over the last four years. Figure 01. Voluntary supplementary EV-related metrics reported by life insurers Numbers publishing Metric Timing of emergence of projected distributable profits on in-force business Timing of emergence of projected distributable profits on new business New business internal rate of return New business payback period 5 Some group companies have also published a holding company cash-flow analysis, showing intra-group dividends, in addition to the metrics described above. 6 Companies also publish sensitivities of their EEV/ MCEV results. Both the EEV Principles and the MCEV Principles require the publication of a minimum set of sensitivities to the EV and the VNB. Some companies also publish additional voluntary sensitivities related to credit spreads and illiquidity premium. At year-end 2011, seven companies published a credit spread sensitivity (eight at year-end 2010). The Marketconsistent methodology section provides details of the illiquidity premium sensitivities towerswatson.com

5 Financial and regulatory reporting developments This section describes recent Solvency II, IFRS and US GAAP developments related to insurance companies and how they may affect future supplementary reporting. Solvency II The Omnibus II Directive, which amends the Solvency II Directive, was finally voted on by the Committee of Economic and Monetary Affairs (ECON) of the European Parliament on 21 March The Directive proposes an implementation date for Solvency II of 1 January 2014 as opposed to 1 January 2013 as was previously envisaged. The Directive also proposes that 1 January 2013 remains the date at which the responsibilities of supervisors and EIOPA would be switched on and by when the transposition of the Directive into national law needs to be complete. However, it is expected that the EU Commission will soon present a proposal postponing the transposition of Solvency II to 30 June Further amendments to the Directive are proposed before the European Parliament vote, currently scheduled for September The 21 March vote approved the inclusion of a matching adjustment, a countercyclical adjustment and measures that would grant temporary equivalence to non-eu businesses for up to six years. There are a number of areas still subject to debate and lobbying such as contract boundaries. It also appears increasingly uncertain whether the Pillar 1 measurement of assets and liabilities will provide a realistic measure of value comparable to an embedded value. Companies have to date not disclosed the impact of Solvency II on the performance metrics described in the previous section, with Solvency II-related disclosure limited to the ongoing cost of Solvency II implementation programmes. This is not surprising, given the uncertainty to date regarding the details of the final Solvency II Pillar 1 basis, and that both the EEV Principles and the MCEV Principles refer to allowing for current legislation and known future changes in the projection. Indeed, in September 2011, the CFO Forum released interim transitional guidance for embedded value reporting stating that for reporting dates on or before 30 June 2012, there is no requirement to make allowance for the developing European regulatory regime (Solvency II) and associated consequences when complying with the EEV or the MCEV Principles. Primary accounting developments Developments have been observed both within current accounting practice and the development of new accounting standards. In recent years, several insurance companies have published supplementary IFRS disclosures, providing an analysis of the IFRS profit drivers, where profit is typically split between investment profit, insurance profit and expense profit. A number of companies also use EEV/MCEV sensitivities in their IFRS risk disclosures. Deliberations on the International Accounting Standards Board s (IASB s) insurance contracts project are still ongoing. The latest IASB information suggests that a revised exposure draft or final review draft will be published in the second half of As a result, current indications are that the final insurance contracts standard is likely to be published in 2013 or 2014 with an effective date not before 1 January The insurance contracts project is currently a joint project with the Financial Accounting Standards Board (FASB), and the FASB exposure draft is also targeted for the second half of The FASB approach is similar to the IASB but a small number of clear differences still exist relating to the risk adjustment, residual/single margin, acquisition costs and premium allocation approach (the most up to date position can be found on the IASB website). However, in the United States, the Securities and Exchange Commission is currently deliberating whether, when and how US GAAP and IFRS should converge. Depending on the outcome, it is possible that the concurrent development of the IASB and FASB insurance contracts project ceases at some point. Given the above timeline, it is possible that the IASB/FASB insurance contracts project will have little impact on supplementary EV reporting and related metrics for several years. Insurers may instead focus on the impact of Solvency II on supplementary reporting. On 16 December 2011, the IASB issued amendments to IFRS 9 Financial Instruments that defer the mandatory effective date from 1 January 2013 to 1 January The deferral will make it possible for all phases of the project to have the same mandatory effective date and will reduce or eliminate the gap with the date the insurance contracts standard is likely to become effective. On 30 January 2012, the UK and Republic of Ireland s Accounting Standards Board published a discussion paper on the future of UK GAAP insurance accounting. The discussion paper notes that until a new insurance contracts IFRS comes into force, there is potentially a void in the insurance accounting standards. This is because the introduction of Solvency II is likely to render the existing UK GAAP approach, aligned with Solvency I, obsolete. In addition, the effective date of Solvency II is likely to be earlier than the effective date of the new IFRS. For further information see our February 2012 Insights The future of UK GAAP for insurers. towerswatson.com 5

6 Towers Watson perspectives The life insurer supplementary reporting pack includes embedded values, related cash flow and new business metrics, and IFRS profit driver analyses. These metrics provide additional insight into business performance, helping senior management make better decisions and communicate externally the metrics used to manage the business. From an external perspective, one issue across the industry with all these metrics is a lack of consistency in the definitions and methodology. Given the current focus by each company on consistency over time, this issue is likely to continue. These supplementary disclosures help fill gaps in current primary and regulatory reporting. But will the gaps remain? Is there a future role for supplementary reporting? In the next few years, both primary and regulatory reporting frameworks are expected to change significantly. In the early years of transition, consistency of supplementary reporting over time, rather than between companies, may be desirable to provide a basis of continuity for investors during a period of change. However, even if companies decide to continue to provide the same supplementary reporting metrics once Solvency II is introduced, the change in the regulatory reporting basis from Solvency I to Solvency II will present challenges around: The upgrade of financial reporting models, processes and systems to reflect the Solvency II regulatory basis. Understanding the differences between the supplementary reporting results on a Solvency II regulatory basis and the existing results, and communicating these to stakeholders. Considering the strategic implications arising from these changes. The future of supplementary reporting in the longer term is less clear. If developments within either primary or regulatory reporting are helpful, companies may be tempted to scale back supplementary reporting. Companies may also be hoping that the required Solvency II disclosures will provide all the information needed or can be easily adapted to fulfil management and external requirements. Given developments to date this may prove to be wishful thinking. Whatever the future of supplementary reporting, insurance companies face a challenge in producing, explaining and managing to multiple metrics in an increasingly volatile world. Financial and regulatory reporting functions will need development and improvement to cope with these future challenges. 6 towerswatson.com

7 Appendix: 2011 EEV and MCEV Principles publications Company Allowance for risk classification 1 Risk Discount Rate approach Options and guarantees 1 Cost of capital2 Year-end 2011 publications under the MCEV Principles Allianz Direct market-consistent Bottom-up Market-consistent Frictional costs Aviva Direct market-consistent Bottom-up Market-consistent Frictional costs CNP Direct market-consistent Bottom-up Market-consistent Frictional costs Hannover Re Direct market-consistent Bottom-up Market-consistent Frictional costs Mediolanum Direct market-consistent Bottom-up Market-consistent Frictional costs Munich Re Direct market-consistent Bottom-up Market-consistent Frictional costs NKSJ Himawari Life 3 Direct market-consistent Bottom-up Market-consistent Frictional costs Old Mutual Direct market-consistent Bottom-up Market-consistent Frictional costs Phoenix Group Direct market-consistent Bottom-up Market-consistent Frictional costs Resolution Direct market-consistent Bottom-up Market-consistent Frictional costs SCOR Direct market-consistent Bottom-up Market-consistent Frictional costs Sony Life 3 Direct market-consistent Bottom-up Market-consistent Frictional costs Swiss Life Direct market-consistent Bottom-up Market-consistent Frictional costs UNIQA Direct market-consistent Bottom-up Market-consistent Frictional costs Vienna Insurance Direct market-consistent Bottom-up Market-consistent Frictional costs Zurich Direct market-consistent Bottom-up Market-consistent Frictional costs Year-end 2011 publications under the EEV Principles Achmea 4 Top-down WACC Top-down Both are used Traditional AEGON Top-down WACC Top-down Real-world Traditional Ageas Direct market-consistent Bottom-up Market-consistent Frictional costs AXA Direct market-consistent Bottom-up Market-consistent Frictional costs Chesnara Direct market-consistent Bottom-up Market-consistent Frictional costs Dai-ichi 3 Direct market-consistent Bottom-up Market-consistent Frictional costs Delta Lloyd Group Top-down WACC Top-down Real-world Traditional Generali Direct market-consistent Bottom-up Market-consistent Frictional costs Hansard Global 5 Direct market-consistent Bottom-up Not material Frictional costs Just Retirement 5 Direct market-consistent Bottom-up Market-consistent Frictional costs Legal & General Top-down WACC Top-down Real-world Traditional Lifenet 3 Direct market-consistent Bottom-up Not material Frictional costs Meiji Yasuda Life 3 Direct market-consistent Bottom-up Market-consistent Frictional costs Mitsui Life 3 Direct market-consistent Bottom-up Market-consistent Frictional costs Mitsui Sumitomo Aioi Life 3 Direct market-consistent Bottom-up Market-consistent Frictional costs Mitsui Sumitomo Primary Life 3 Direct market-consistent Bottom-up Market-consistent Frictional costs Prudential 6 Other Bottom-up Both are used Traditional PZU Direct market-consistent Bottom-up Market-consistent Frictional costs Royal London Direct market-consistent Bottom-up Market-consistent Frictional costs SJP Indirect market-consistent Bottom-up Not material Not disclosed SNS REAAL Top-down WACC Top-down Real-world Traditional Standard Life 7 Indirect market-consistent Bottom-up Market-consistent Traditional Storebrand Direct market-consistent Bottom-up Market-consistent Frictional costs Sumitomo Life 3 Direct market-consistent Bottom-up Market-consistent Frictional costs T&D Insurance Group 3 Direct market-consistent Bottom-up Market-consistent Frictional costs 1 At year-end 2011 a number of different market-consistent approaches were used in EEV and MCEV to set the reference rate, to adjust for illiquidity, and to set the allowance for non-hedgeable risk. For more information see pages 2 and 3. 2 Traditional cost per unit capital is the difference between the top-down RDR and the net earned rate. Frictional costs were almost always defined as tax and investment expenses. 3 Financial year-end is 31 March Previously Eureko. Renamed Achmea in November Financial year-end is 30 June Prudential used a bottom-up product specific beta approach, except for UK annuities where it used a market-consistent approach with a risk-free rate of swaps plus an illiquidity premium adjustment. 7 Standard Life used an indirect market-consistent approach which separately calibrated the allowance for risk by in-force business / new business and by region. towerswatson.com 7

8 Contacts For further information, please contact your usual Towers Watson consultant or: James Harrison Tim Bateman Stefan Bause Jean-François Cartier jean-francois.cartier@towerswatson.com James Creedon james.creedon@towerswatson.com John Dieck john.dieck@towerswatson.com Alex Dollhopf alexander.dollhopf@towerswatson.com Monica Florian monica.florian@towerswatson.com Masahiko Fujiki masahiko.fujiki@towerswatson.com Bernhard Gose bernhard.gose@towerswatson.com Colm Guiry colm.guiry@towerswatson.com Evrim Koksal Arkut evrim.koksal.arkut@towerswatson.com Dominique Lebel dominique.lebel@towerswatson.com Vladimir Novikov vladimir.novikov@towerswatson.com Ana Claudia Orza ana.claudia.orza@towerswatson.com Gerard Pater gerard.pater@towerswatson.com Regis Renard regis.renard@towerswatson.com Gerber Schnetler gerber.schnetler@towerswatson.com Rosie Watson rosemary.watson@towerswatson.com Kamran Foroughi kamran.foroughi@towerswatson.com About Towers Watson Towers Watson is a leading global professional services company that helps organisations improve performance through effective people, risk and financial management. With 14,000 associates around the world, we offer solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson is represented in the UK by Towers Watson Limited and Towers Watson Capital Markets Limited. The information in this publication is of general interest and guidance. Action should not be taken on the basis of any article without seeking specific advice. To unsubscribe, eu.unsubscribe@towerswatson.com with the publication name as the subject and include your name, title and company address. Copyright 2012 Towers Watson. All rights reserved. TW-EU May towerswatson.com