Insto roundup: New China insurer rules; GIC adds to board
Australian boutique fund house and owner of 25 million AMP shares, Merlon Capital Partners, issued two open letters to the AMP board on October 27 and November 1, accusing AMP of undervaluing businesses being sold to UK insurer Resolution Life.
It also threatened to initiate a board spill if the queries in its letters are not adequately addressed by AMP.
AMP announced the proposed sale of its Australian and New Zealand wealth protection and mature businesses to UK insurer Resolution Life for $2.4 billion on October 25 for 0.82x pro forma embedded value. Merlon has challenged AMP’s actuarial assessment and called for AMP to disclose further details about how the figures in the deal were arrived at, and to ensure that the proceeds of the sale would be returned to shareholders as soon as funds become available.
If these matters remain unresolved, Merlon said it was prepared to lobby other investors to convene an extraordinary general meeting and force the directors to seek re-election.
Source: Merlon Capital Partners 1st letter, 2nd letter
Construction and Building Unions Superannuation (Cbus) announced its support of director identification numbers (DINs) in a submission to a Treasury department consultation on November 1, citing the impact of illegal phoenixing activities on Cbus members.
Phoenixing is when a company is liquidated in order to avoid responsibility for its debts and a new company is formed to continue the business of the liquidated firm. This practice is especially prevalent in the Australian construction industry, where many of the superannuation fund’s members are employed.
Over the last 10 years, Cbus has recovered more than $22 million in superannuation entitlements from insolvency actions. Implementing a DIN system would help Cbus more effectively identify company directors who have a history of phoenixing, as well a communicate phoenix-like activity to the regulators.
TCorp, investment manager for the New South Wales government, announced on November 2 that Tanya Branwhite would be joining as head of portfolio construction. Branwhite was most recently director of listed equities and director of market insights and portfolio implications at Australian sovereign wealth fund Future Fund.
In addition to Branwhite’s appointment, TCorp also announced that Derek Mock, most recently a principal consultant at Mercer, would be joining as senior portfolio manager, and Tom Gillespie would be taking on the role of senior manager portfolio risk.
Health and community service sector superannuation fund Hesta has said that Nicola Roxon would become succeed Angela Emslie as the new independent chair after Emslie steps down on December 31. Roxon was Australia’s minister for health and ageing from December 2007 to December 2011, and attorney-general from December 2011 to February 2013.
Roxon will step down from her current roles as chair of the accounting professional and ethical standards board and an adjunct professor at the College of Law and Justice at Victoria University when she takes up her new role. She is currently also chair of Bupa Australia and New Zealand.
Beijing plans to slash constraints on domestic insurance firms’ investment into equities in a further bid to channel funds into China’s ailing stock markets, reports mainland publication Caixin, quoted by International Investment.
The China Banking and Insurance Regulatory Commission has published a draft of new guidelines, under which insurers will be able to invest in specialised products that will not be subject to existing restrictions on stock investments.
Insurance firms can currently only buy shares of fellow insurers, non-insurance financial companies and companies linked to the insurance sector such as healthcare and auto services. Investments are capped at 30% of a company’s assets.
Source: International Investment; Caixin
The territory's Mandatory Provident Fund (MPF) schemes are collectively on track to report their worst year since 2011, when they lost 8.41%. The MPF schemes suffered a 7.38% loss in the first 10 months of the year, according to data from Refinitiv Lipper, the bulk of that happening in October as stock markets around the world took a hammering.
In October alone, the 430 MPF investment funds tracked by Lipper, formerly Thomson Reuters Lipper, lost an average of 5.63% - the worst monthly return since August 2015. According to a calculation by another MPF consultant, Convoy, employees covered by the scheme on average lost HK$19,661 in the first 10 months of 2018, witth HK$14,046 being lost in October alone.
The Hong Kong Mortgage Corporation (HKMC) is planning to invest in a diverse array of Chinese infrastructure loans and repackage them for sale to investors, as part of a broader array of infrastructure refinancing plans by Beijing.
The HKMC's plan is designed to help it access more liquidity so that it can invest into more infrastructure projects, and is part of a broader intention by Beijing and the Hong Kong Monetary Authority to use the Infrastructure Financing Facilitation Office to repackage Chinese infrastructure loans and sell them on to new investors.
A number of Chinese infrastructure investments into Africa could see their debt repackaged in this process; several China-backed projects in Africa have made losses, and require some restructuring.
Source: The East African
Government Pension Investment Fund (GPIF) reported a 3.42% rate of investment return in the second quarter of the 2018 fiscal year, to help raise its quarter-on-quarter assets under management by ¥7.03 trillion to ¥165.61 trillion ($1.46 trillion), the fund revealed on November 2.
The rate of return was an improvement on the 1.68% reported in the first quarter, and the 3.49% drop it recorded for between January and March. Foreign equities now comprise 25.7% of GPIF’s portfolio, domestic equities stand at 25.65%, and local bonds are at 25.26%. The latter is nearing the bottom of the 10 percentage-point deviation limit GPIF is allowed to take on its 35% domestic bond investment target.
A few days earlier GPIF released an environmental, social and governance report for the 2017 fiscal year, which included a note that index provider MSCI had seen a 60% increase in its dialogue with Japanese companies to conduct ESG evaluations during 2017, when the pension fund provider adopted three ESG indexes, two sourced from MSCI.
Faster than expected depletion of the National Pension Service’s assets could force the government to raise premiums from 9% today to up to 40% in the future, according to a professor. Kim Won-supp, professor of social studies at the Korea University, said that Korea’s society is aging faster than expected, and this is forcing the government to consider raising premiums, the payment of which are divided equally between employer and employee.
A new plan is expected to be introduced this month which will include likely premium increases. Two options could see premiums rise up to 11% from the beginning of 2019, or a more gradual increase to 13.5% over the coming decade.
Source: Korea Times
Great Eastern Holdings, is currently in discussions with Malaysian authorities about possible options to help its unit, Great Eastern Life Assurance Malaysia (GELM), satisfy foreign ownership requirements for insurance companies operating in Malaysia.
One of the options could be GELM making a contribution to a special insurance development trust fund being considered by the government. However, this has not been confirmed.
“The discussions on the options are on-going at this stage and details have yet to be finalised. Based on the options currently being considered, GEH believes there will not be a material impact on the earnings of GELM and GEH,” a media statement said.
The statement is in response to Malaysia’s finance minister Lim Guan Eng's statement that GELM will contribute an initial seed funding of $659.76 million (RM2 billion) to a special insurance development fund being set up by the government. Lim made the comment during the presentation of Malaysia’s annual financial budget on November 2.
Source: The Straits Times
GIC has appointed two new board members.
Lawrence Wong, minister for national development and the second Minister for finance, has been appointed to the board effective November 1.
Since August 1, 2017, Wong has been a member of the GIC investment strategies committee, a board committee which oversees GIC’s performance and risk profile and makes appropriate recommendations to the board on investment policy.
The second appointment is that of Seck Wai Kwong, chief executive of Asia Pacific at State Street Bank and Trust Company, which will be effective from November 9. Seck previously served on the GIC Risk Committee from 2010 to 2016.
Temasek has acquired a minority stake in healthcare company AeroGen through a secondary share purchase. Financial terms of the transaction were not disclosed.
Following the closing of the transaction, Abhijeet Lele, Temasek’s managing director of investment, and Steven Gannon, former chief fnancial officer of Aptalis (now Adare Pharmaceuticals), will join Aerogen’s board of directors.
AeroGen is an acute care aerosol drug delivery systems provider.
A non-executive board director of Temasek passed away on November 1.
Kua Hong Pak had served on the Temasek board since November 1996, and was chairman of the audit committee since July 2002.
INTERNATIONAL (EXCLUDING ASIA)
Only 5% of the UK’s biggest corporate pension funds have a policy on climate change, despite growing concern about the possible effect of global warming on returns.
According to research by law firm Pinsent Masons, none of the 43 funds analysed, which collectively oversee £479 billion ($622 billion) in assets, have a target for investment in low-carbon, energy-efficient or sustainable assets. In addition, they all lack a “decarbonisation” target for their investment portfolio.
The lack of action comes despite pressure from policymakers and investors for pension funds to factor the risks of climate change into investment decisions.
Source: Financial Times
Norway is deciding whether to separate its $1 trillion oil fund from the central bank and make it an independent organisation – a decision that will have a profound impact on how the institution will invest, said chief executive Yngve Slyngstad.
A reserve fund would naturally be housed in the central bank and focus on public assets, while an endowment would have greater independence and delve more into infrastructure and property, as well as other private and less liquid assets.
This would be the most important decision over the last 20 years for the world’s biggest sovereign wealth fund, noted Slyngstad. The Norwegian government has proposed keeping the fund inside the central bank, but Norway’s parliament will have the final say.
Source: Financial Times
Canadian pooled pension funds posted a big quarter-on-quarter drop in median returns to almost flat performance for the three months to September 30 .
In the third quarter of 2018, diversified pooled fund managers posted a median return of 0.4% before management fees, according to Toronto-based consulting firm Morneau Shepell. That compares to median returns of 3.44% and 6.84% for the respective six and 12 months to September 30.
However, despite this fall in returns, the pension funds’ drop in actuarial liability was larger, so on a solvency basis their financial positions improved for the third quarter, found the research, which covers 327 pooled funds with a total market value of around $268 billion.