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Impact Investing

IPE special report May 2018

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APG mulls future of insurance subsidiary Loyalis

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APG, the asset manager of the €405bn Dutch civil service scheme ABP, is considering selling its insurance subsidiary Loyalis as it needs “scaling-up”.

In its annual report for 2017 APG said that, together with Loyalis, it was carrying out a “broad investigation” into the “best chances for the desired growth” for its insurer.

Sale was an option, an APG spokesman confirmed to Dutch financial newspaper FD. “All options are on the table,” he said.

According to the FD, a sale was the most logical outcome given ongoing consolidation in the Dutch insurance sector due to price pressure and a declining life insurance market.

In March APG sold its subsidiary Inadmin – which specialises in the administration of low-cost defined contribution vehicles (PPI) – to Dutch administration firm RiskCo.

ABP established Loyalis in 2002 in order to offer its members insurance products.

However, as Dutch regulator De Nederlandsche Bank decided that this posed unfair competition in relation to the insurance sector, Loyalis was made an independent entity in 2008.

Initially it offered a savings product to compete with banks. Currently it focuses on labour disability insurance.

Its expectation of significant growth in pension products for self-employed workers has not materialised, with approximately 2,700 clients at year-end – significantly short of its target of 50,000 by 2019.

APG’s annual report also revealed that price reductions on pensions provision negatively affected its profit.

As pension funds paid less for its services, APG had to write off €74m from its margin. As a result its profit dropped 27% to €47m.

A spokesman declined to provide details about which pension fund clients had their costs reduced.

However, its main client, ABP, said in its annual report for 2017 that its costs for pension provision had decreased €5m as a result of a new cost-cutting agreement with APG.

Last year, APG paid staff at its asset management division €30m in bonuses against €31.5m in the previous year.

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