IGP LUNCH N LEARN EMPLOYEE BENEFITS TRENDS IN LUXEMBOURG May 15th, 2013

Transcription

1 IGP LUNCH N LEARN EMPLOYEE BENEFITS TRENDS IN LUXEMBOURG May 15th, 2013

2 Introduction to Cardif Lux Vie A Luxembourg based Life Insurance Leader 2

3 Cardif Lux Vie A Luxembourg based Life Insurance Leader Cardif Lux Vie is a Life insurance company resulting from the 2012 merger, between Cardif Lux International and Fortis Luxembourg Vie. Both companies had complementary competences, which make the resulting «Cardif Lux Vie» the second insurance company in the Luxembourg market, both in terms of Assets under Management and gross annual premium inflow. Fortis Luxembourg-VIE S.A. Strong domestic activity (retail & EB) (N 3 on the market) and a good positioning with it s international offer. + Cardif Lux International A dynamic activity exhibiting strong growth (from 360 Mn to 1,7 Bn in 3 years) with an international offer and a strong group activity. A good balance between -domestic and international -group and non group activity A broad product offering A strong growth of assets under management Robust results and financials 3

4 Cardif Lux Vie Shareholders with superior financial strength Cardif Lux Vie is owned by three shareholders: BNP Paribas Cardif (33,34%), BGL BNP Paribas (33,33%) and Ageas (33,33%). 4

5 Introduction to Cardif Lux Vie Shareholders with superior financial strength 5

6 Cardif Lux Vie Shareholders with superior financial strength BNP Paribas Cardif is the insurance subsidiary of the BNP Paribas Group, a European leader in the financial services area both in terms of size and financial strength. BNP Paribas Cardif ranks among the 10 largest European insurers and aims to become the worldwide leader in insurance related partnerships Bn Premium Inflow in 2011 Presence in Europe, Asia, Latin America Over employees Partner of 35 out of the top 100 banks worldwide Shareholder: BNP Paribas Cardif is owned at 99,99% by BNP Paribas 6

7 Cardif Lux Vie Shareholders with superior financial strength With activities in Retail Banking, Wealth Management and Corporate & Investment Banking, BGL BNP Paribas is a leader on the Luxembourg market and offers a wide array of products and services to individual, corporate and institutional clients. 793 Mn of Net Banking Income in st largest financial sector and 2 nd largest private employer in Luxembourg Nominated «Bank of the Year 2011 in Luxembourg» (The Banker) Over 2700 employees Shareholders: BGL BNP Paribas is owned for 66% (directly and indirectly through BNP Paribas Fortis) by BNP Paribas and for 34 % by the Luxembourg State 7

8 Cardif Lux Vie Shareholders with superior financial strength Ageas is an International Insurance Group with over 180 years of experience and ranked within the European insurance top 20. Ageas focuses its activities on Europe and Asia, which, together represent the largest insurance market worldwide. Ageas is the majority shareholder of AG insurance, the largest insurer on the Belgian market. 17,2 Bn Premium Inflow in Mn net insurance profit in Bn AuM at the end of employees in 13 countries 8

9 Cardif Lux Vie Employee Benefits Our Market Position 9

10 Employee Benefits Strong position in the market Strong knowledge and presence for more than 20 years in the Luxembourg EB market 3rd largest player with 40 Mn inflow p.a. and around 200 Mn EB-related AuM A diversified portfolio of clients (size/activity) with over 350 active groups An active collaboration with the largest brokers and consultancies A longstanding relationship with several leading pooling networks Today, 20% of Luxembourg based companies have chosen Cardif Lux Vie to manage their group insurance scheme 10

11 Cardif Lux Vie Employee Benefits Wide range of Products and Services 11

12 Employee Benefits Wide range of products Savings Lump sum or annuity at retirement Targets based either on Defined Contributions or Defined Benefits Funding by employer or employee Accumulated individually (unit credit method, ) or collectively (aggregate cost,...) Using vehicles such as: Traditional Life insurance products (Endowment, Differed Capital, ) Unit Linked with underlying assets adapted to the client profile : guaranteed rate + profit sharing, Internal funds with pre-defined risk profiles or external funds in open architecture Capacity to transfer and manage vested interests in collective schemes approved by the local social security body (IGSS): Régime dûment agréé New reins. " treaties as " from " " enabling " increased " price/cover" flexibility" within an " unchanged " risk/return" profile"! 12

13 Employee Benefits Wide range of products Life covers before retirement Payment of a lump sum or annuity to beneficiaries Pooling or Experience Rating possibilities depending on the contract size Increased Free Cover Limits since Disability cover before retirement Payment of a lump sum or annuity Premium waiver possibilities Pooling or Experience Rating possibilities depending on the contract size Increased Free Cover Limits since New reins. " treaties as " from " " enabling " increased " price/cover" flexibility" within an " unchanged " risk/return" profile"! More competitive tariff since

14 Employee Benefits Services offered Actuarial Qualified actuaries take care of matters such as Actuarial monitoring of premiums, claims and provisions Reporting towards Luxembourg social security body (IGSS) Management of the liabilities of pension funds or internal regimes IFRS reporting Further, actuaries can assist in tailoring pension solutions to customers needs beyond regular group insurance solutions Investments Since the merger, CLV manages directly one of the largest institutional asset portfolio in Luxembourg (the largest in the insurance sector with over 3 Bn AuM). Asset allocation is tailored to the clients and company needs based on detailed asset and liability analysis conducted in house. In the area of fund selection, the company collaborates with FundQuest, the BNP Paribas subsidiary specialized in screening funds for the best performance over the appropriate time horizon and risk appetite. 14

15 Employee Benefits Services offered Administration The administration department is involved as from the design of the solution appropriate to customers needs During the life of the contract, the admin department is responsible for The issuances of the group insurance policy and of the financing plan The necessary fillings with the IGSS The monthly communication of account status The yearly communication of pension status and of tax documents The handling of claims Our major engagements towards clients are (1) quality, (2) swift reaction time and (3) assistance in French, English, German, Luxembourgish, Dutch and Portuguese languages Clients are offered access to a dedicated web-based platform enabling HR departments to follow up necessary figures and individual affiliates to consult their insurance details or directly conduct several tasks related to their insurance contracts 15

16 Cardif Lux Vie Employee Benefits Why Luxembourg? 16

17 The Specific Advantages of Luxembourg Strong expertise for International clients The Luxembourg life insurance sector is characterized by a long tradition of financial expertise and a strong knowledge to satisfy international client s needs. Legal framework with the best protection for the company and employees The Luxembourg regulatory framework offers optimal security for policy holders. Clients hold a super privilege on these distinct assets in the event of a bankruptcy of the insurance company. Access to innovative and sophisticated investment vehicles The Luxemburg regulation gives access to innovative and sophisticated investment vehicles, in a more extensive choice than that of any other European country 17

18 Cardif Lux Vie Employee Benefits Our Team 18

19 Our Team Guillaume ROCHIGNEUX Director EB & Retail Patrice FALLA Head of EB (+352) Actuaries Michael SIMARD Head of Business Development EB (+352) Elisabeth CORDEIRO Manager Admin EB (+352) Rudy FRANCOIS Business Development EB (+352) Jean-Paul ANDRE-DUMONT Product Development EB (+352) Plan Administrators + 1 Contract Administrator 19

20 Cardif Lux Vie Employee Benefits Trends in Luxembourg 20

21 The Pension System Retirement: the three pillars State Pension Company Pension Personal Pension I st PILLAR II nd PILLAR III rd PILLAR 21

22 The State Pension in Luxembourg" Distribution system System based on solidarity Social contributions of present workers finance the pension of present pensioners Level of pension 72 % 74 % last salary (average) Depends on : The length of the professional career; The level of the social security ceiling ; The evolution of the salary throughout the professional career. 22

23 The Pyramid of Ages! Age Men Women Population Pyramid EU-27 in 1991 % of the total population Age Men Women Population Pyramid EU-27 in 2011 % of the total population Age Men Women Population 1 Pyramid EU-27 in 2060 % of the total population ,8 5,8 7,0 8,9 12,7 14,4 16,6 11,0 12,0 18,0 17,6 17,5 66,9 64,3 61,7 59,0 57,0 56, years years years 80+ years ,6 15,5 14,7 14,2 14,3 14,

24 State pension : THE problem" YESTERDAY WORK PENSION DEATH TODAY WORK PENSION DEATH TOMORROW??? WORK PENSION? DEATH 24

25 The State Pension Problem in Luxembourg" The pension system in Luxembourg is [still] very generous Below table compares the Pension Replacement Rate* of Luxembourg with it s neighboring countries. 100% 87,40% 80% 60% 40% 42% 42% 49,10% 57,30% 20% 0% Belgique Allemagne France OCDE Luxembourg (Source OCDE «Pension at a glance OCDE 2009») *) The old-age pension replacement rate is a measure of how effectively a pension system provides income during retirement to replace earnings which were the main source of income prior to retirement. 25

26 The State Pension Problem in Luxembourg" CURRENT SITUATION IS STILL HEALTHY DUE TO : Stable to positive employment market Positive economic evolution in the past years Moderate increase in number of pensioners WORSENING OF THE FUTURE FINANCIAL SITUATION DUE TO : Aging of the population and longer life expectancy Increase in the number of pensioners Past economic growth rates difficult to reproduce 26

27 The State Pension Problem in Luxembourg" WITHOUT PENSION REFORM Deficit in the pension system by 2020 Reserves depleted by 2035 Required contribution rate of 43% (vs. 24% today) PRINCIPLE OF REFORM: EXTENSION OF RETIREMENT AGE Leave earlier with a reduce pension Leave later with an unchanged pension 27

28 Retirement age in Europe Country! Men! Woman! Austria" 65" 60" Belgium" 65" 65" Denmark" 65-67" 65-67" Finland" 62-68" 62-68" France" 62" 62" 60 in Talks to raise to 66 by 2016 and 70 by 2046" Germany" 65" 65" Plans to increase age" Greece" 67" 60-67" Was forced to changed the retirement age by EU" Ireland" 65-66" 65-65" Italy" 66" 66" Luxembourg" 65" 65" Plans to increase age" Netherlands" 65" 65" Plans to raise to 67" Norway" 67" 67" Poland" 67" 67" Portugal" 65" 65" Spain" 65" 65" Sweden" 61-67" 61-67" Switzerland" 65" 64" United Kingdom" 65" 60" Undergoing changes at the moment, plans to raise to 68 by 2046 and 73 by 2067" 28

29 The State Pension Problem in Luxembourg" THE FOLLOWING ELEMENTS REMAIN UNCHANGED Three tier financing of state pension (state, company, employee each pay 8%) Retirement age remains at 65 years Early retirement possible from age 57 if 40 years of contributions Education years are taken into consideration Minimum pension is maintained Indexation and pension adjustments No retroactive modifications 29

30 The State Pension Problem in Luxembourg" THE FOLLOWING ELEMENTS ARE MODIFIED: Increase of the flat rate increase rate (based on career) Increase of the proportional flat rate increase Reduction of the proportional flat rate increase (based on salary) CONSEQUENCES It becomes necessary to extend the retirement age by 3 years to maintain the same pension level 30

31 The State Pension Problem in Luxembourg" ARE THE ASSUMPTIONS USED BY THE STATE REALISTIC? Yearly economic growth rate at 3% Employment increase of 1,5% FUTURE REFORMS? The law foresees measures to tighten pension rules further in case of worsening of the situation 31

32 The State Pension Problem in Luxembourg" OLD AND NEW LEGISLATION (SOURCE LCGB) : 1 st COMPARISION : Last Salary : OLD pension legislation : 2.325,04 NEW pension legislation (2033) : 2.225,73 (- 4,27 %) NEW pension legislation (2053) : 2.053,11 (- 11,27 %) OLD AND NEW LEGISLATION (SOURCE LCGB) : 2 nd COMPARISION : Last Salary : OLD pension legislation : 3.085,75 NEW pension legislation (2033) : 2.937,70 (- 4,80 %) NEW pension legislation (2053) : 2.687,04 (- 12,92 %) 32

33 Cardif Lux Vie Illustration 33

34 ILLUSTRATION" CERTAINTIES: Important difference between the last salary and the pension amount due to : Calculation method of state pension ; Salary above the social security ceiling ; Career in different countries ; Incomplete career ; Difference amount? Difficult to say with certainty! 34

35 ILLUSTRATION" Example I would like to have an annuity pension of per month I would like this amount to be indexed by 2% yearly I would like to get this pension from age 65. What is the capital requirement to pay a life long pension based on todays life expectancy? 35

36 ILLUSTRATION"

37 Cardif Lux Vie Group Insurance 37

38 Group Insurance - A Win-Win Situation for Employers and Employees" Two possibility: Company Pension : Tax deductible Not subject to social security contributions Flat tax of 20% Compensatory tax of 0.90% Personal Pension : Deductible at the marginal rate Not subject to social security contributions Non-taxable in Luxembourg 38

39 Group Insurance - A Win-Win Situation for Employers and Employees" Company Pension Hypothesis 1 Single (Tax class 1) Annual Salary : Propose salary increase : Comparison Salary increase of Company pension plan premium of

40 Group Insurance - A Win-Win Situation for Employers and Employees" Salary increase of Cost for the employer: Social Security and IPP : 551,93 Net increase : 448,07 Company pension plan premium of Cost for the employer : Taxes (20,90 %) : 172,87 Pension plan premium: 827,13 Difference of

41 Group Insurance Personal Contributions" PERSONAL PENSION Hypothesis Single (tax class 1) Yearly salary : Age : 45 years End of contract : 65 years Yearly premiums : Personal contributions, where are the benefits? 41

42 Group Insurance Personal Contributions" Personal Contribution! Tax deduction! Net contribution! After 1 year 1.200" - 487" = 713" After 20 years " " = " Interest rate: 1,75% Capital at the end" ,95" Yearly return of 5,38%! during 20 years" Yearly net contribution : 713 = (personal contribution) (tax deduction) ð give a annual return of over 5% excluding profit sharing 42

43 43 Thank you for your attention!!

44 Contacts Guillaume ROCHIGNEUX Tel: (+352) Director EB Patrice FALLA Tel: (+352) Head of EB Elisabeth CORDEIRO Tel: (+352) Manager Admin EB Michael SIMARD Tel: (+352) Head of Business Development EB Rudy FRANCOIS Tel: (+352) Business Development EB Jean-Paul André-Dumont Tel: (+352) Product Development EB 44

45 Cardif Lux Vie" Avenue de la Porte Neuve, 23-25" "L-2227 Luxembourg" " Tel: +(352) " Fax: +(352) " " Postal address:" B.P. 691, L-2016 Luxembourg" " " 45

46 Insert logo of client, prospect, consultant, network partner (to be done in the slide master) Trends in Pooling: Benefits for Corporate and for Subsidiary IGP Lunch n Learn Luxembourg May 15, 2013 Wim Moldenaers IGP Europe Benoit Van den Daelen IGP Europe Copyright Info: IGP Europe prepared this presentation solely for training purposes. 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.

47 The IGP System: Parent Company Subsidiary A Subsidiary B Subsidiary C Intermediary? Intermediary? Intermediary? Network Partner A Network Partner B Network Partner C Pooling & Reinsurance Agreement John Hancock / Manulife 47

48 International Employee Benefits & Pooling - Agenda Trends in International EB Plans Trends in the Pooling & Captive market Advantages for Subsidiary Advantages for Corporate Future

49 Trends in International EB plans Further move away from DB to DC or hybrid plans Guaranteed versus non guaranteed interest rates Separating the risk and the savings elements of an EB plan (Anglo-Saxon way) Cost containment measures mainly on disability and medical plans Change from broker commissions to consultancy fees Move away from local dividend arrangements to cheaper upfront premiums (cash-flow) Pan-European plans Company wide sector plans for blue collars Pension annuities versus pension lump sums

50 International Employee Benefits & Pooling - Agenda Trends in International EB Plans Trends in the Pooling & Captive Market Advantages for Subsidiary Advantages for Corporate Future

51 Trends in the Pooling & Captive Market Growing influence of Corporate or Regional HQs in local employee benefits buying decisions cost savings through globalization Increased involvement of Financial Managers, supported by HR and C&B Managers More and more multinationals are issuing corporate guidelines on which providers should be selected Outsourcing EB plans, questioning Pension Funds Pressure to agree to Performance Standards Focus on local upfront cost reductions

52 Trends in the Pooling & Captive Market Rationalization of benefits Benefit audit & study Increase corporate control on local EB plans Harmonization of benefits per country, minimum cover Reduce number of pools Rationalization of broker costs Global broker mandates Same consultant on local and international (pooling) level Cost containment measures Pressure on local rates, rate guarantees Pressure on pooling expenses Improve cash flow

53 Trends in the Pooling & Captive Market Increased use of pooling/captive mechanism (existing and new IGP clients) More awareness of pooling by local subsidiaries and their advisors Increased number of multinationals sharing the international dividend with their subsidiaries Increased need for information on local EB issues at Corporate or Regional HQs level Expansion into new countries/markets Increased request for on-line information on performance of the local EB plans

54 International Employee Benefits & Pooling - Agenda Trends in International EB Plans Trends in the Pooling & Captive market Advantages for Subsidiary Advantages for Corporate Future

55 Advantages for Subsidiary Local IGP Partner is a market leader so competitive price and excellent service Control of IGP over its Partners Information on local plan and result is shared with corporate so less need to transfer data to corporate The local contract remains a pure local contract Local terms and conditions can be improved through pooling Benefit of being part of a multinational is explored Possible share of the international dividend or...

56 Advantage for Subsidiary Typical questions from subsidiaries: Where is IGP getting their money from? Why is the Network Partner part of IGP? What happens with the int. dividend? Do I get my share? Can local terms and conditions be improved thanks to IGP pooling? Can IGP offer local cash flow advantages? Why does IGP only work with one Network Partner per country? What do you report to my HQs and how will this sharing of information be beneficial for me? What happens with my relationship with my local broker?

57 International Employee Benefits & Pooling - Agenda Trends in International EB Plans Trends in the Pooling & Captive market Advantage for Subsidiary Advantage for Corporate Future

58 Advantage for Corporate Information on typical local EB plans Reporting (proposals, interim reports, international experience reports, ) data gathering Control performance of local insurers Password-Protected IGP Client Websites International cost-savings thanks to economies of scale and spreading of the risk 58

59 International Employee Benefits & Pooling - Agenda Trends in international EB plans Trends in the Pooling & Captive market Advantages for Subsidiary Advantages for Corporate Future

60 Future outlook? Consolidation of networks? Future challenges faced by networks Higher expectations from clients and consultants - Performance guarantees & service standards - Pressure on local and international pricing - Financial stability of network and its insurers - Online solutions & reporting Continued focus on captive reinsurance & increased involvement of risk management Claims management and wellness programs

61 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, long term relationships Efficient and high-quality reporting and information Diverse and extensive product portfolio Arrangements for any size account Solutions available for TCNs and Expatriates 61

62 Any further questions?