Achmea cites low interest rates for switch to DC pensions
NETHERLANDS - Pensions and life insurer Achmea said it has stopped offering asset-accumulating products and traditional guaranteed products because they were no longer profitable due to persistent long-term interest rates.
Instead, it will focus on standardised defined contribution products that can be distributed through the holding's different labels and distribution channels, the company said in its annual report.
It said it had been developing hybrid solutions, such as low-cost DC products with guaranteed components, to meet demand from existing customers.
"These products offer employers predictability on contribution costs, whereas some provide the guaranteed end-term pension payment employees want," it said, adding that the products were supported by cost-reducing "straight-through" processing.
Achmea noted that the market for pensions and life insurance had been deteriorating for the past five years, and that it was now considering the decline as "structural".
It attributed this development to competition from new bank savings products offering similar tax advantages, as well as the prolonged period of low interest rates.
As a consequence, it is now "seriously investigating" options for portfolios of asset-accumulating life products, with no business case for migration or conversion into alternative products.
Last year, Achmea made a loss of €292m on its life activities - consisting of pensions and life insurance, asset management and its pensions administration division Syntrus - after making a profit of €107m during 2010.
It attributed the loss mainly to Greek government bonds (€114m), its €14bn property portfolio (€60m) and guarantees on segregated accounts (€143m).
The loss on guaranteed group contracts for pensions insurance and lower property values, as well as low interest rates, caused the coverage level to drop to less than 100%, it said.
Syntrus Achmea is pensions provider for 70 pension funds, with approximately 3m participants.