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© International Group Program
An exploration into the world of IGP and multinational pooling....
2016 IGP Regional EMEA Employee Benefits Seminar Windsor (UK), 24 May 2016
Bartosz Racino, Senior Account Representative
This presentation was exclusively prepared for the Seminar 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. The information in this document does not constitute financial advice and is subject to change. Please contact your IGP Account Manager or [email protected] for more details.. IGP Network Partners operating outside of the United States are not licensed in or authorized to conduct insurance business in New York. The policies or contracts issued by a Network Partner to contract holders abroad are not protected by the New York State guaranty funds, such policies or contracts have not been approved by the New York Superintendent and may not be subject to the laws of New York.
© International Group Program
Key Topics
IGP Multinational Pooling
The IGP System
Going Forward Win-Win
Introduction to IGP with historical background,
organisation and key figures
© International Group Program
Introduction to IGP
May 20, 2016 3
Historical Background
© International Group Program
Introduction to IGP
May 20, 2016 4
Historical Background
© International Group Program
Introduction to IGP
May 20, 2016 5
In many countries, the largest insurance companies in the world are IGP partners
© International Group Program
Introduction to IGP
May 20, 2016 6
In the other countries, IGP partners with the top players in the market
© International Group Program
IGP Portfolio
May 20, 2016 7
Key figures @ April 30, 2016
• Total annual premium: close to 1.6 billion USD
• 10 captive arrangements in force
60 250
420 650
819
75
1400
2520
4258
4889
0
1000
2000
3000
4000
5000
6000
1970 1980 1990 2000 Now
No of Parents No of Units
© International Group Program
Introduction to IGP
May 20, 2016 8
Market Share Data - Annual Survey Run via Deloitte
27% multinational
pooling clients
25% pooled
subsidiaries
22% pooled
premium
• 12/31/2014 results reconfirm IGP as one of the largest networks: Multinational Pooling Clients: 27% Pooled Subsidiaries: 25% Pooled Premium: 22%
© International Group Program
Key Topics
IGP Multinational Pooling
The IGP System
Going Forward Win-Win
What is multinational
pooling?
© International Group Program
Introduction to Pooling
• What is “Pooling”? Combining... the financial results... of a multinational company’s local employee benefit plans… in multiple countries... into a “pool of contracts”... for international experience-rating purposes
“Accounting procedure which optimizes
the financial efficiency of insured programs globally”
May 20, 2016 10
What is Pooling?
© International Group Program
Introduction to Pooling
• Making a profit and loss account ...
• for employee benefit contracts ...
• across two or more countries ...
May 20, 2016 11
What is “International Experience Rating”?
Australia Taiwan
Spain Chile UK
© International Group Program
Introduction to Pooling
• Most insured group employee benefits Death Disability Medical Insured pension
May 20, 2016 12
What can be pooled?
© International Group Program
Introduction to Pooling
• Challenges for corporations:
Differences in: ‐ Customs ‐ Legislation ‐ Social security
Lack of information resulting in:
‐ Lack of management guidance & supervision
‐ Lack of cost effectiveness
May 20, 2016 13
Multinational Employers’ Needs
© International Group Program
Multinational Pooling Meets Multinational Employers’ Needs
Introduction to Pooling
May 20, 2016 14
Multinational Employers’ Needs
Cost Savings
Service
Management Control
Information Tax Effectivess
© International Group Program
Key Topics
IGP Multinational Pooling
The IGP System
Going Forward Win-Win
Why is IGP your best choice? How
does it work in IGP, including types of
products and examples.
© International Group Program
IGP Meets Employers’ Needs
May 20, 2016 16
Cost-Savings
© International Group Program
The IGP System
May 20, 2016 17
First & Second Stage Accounting
First Stage Accounting
• Local Level • No pooling
Second Stage Accounting
• Preserves the terms & conditions of the local insurance contract
• Separate local contracts continue to exist
• Benefit levels are unaffected • Takes advantage of a
multinational company’s worldwide size
• Achieves economies of scale • Reduces risk charges • No implementation charges
© International Group Program
The IGP System
May 20, 2016 18
What Happens to the Premium the Subsidiary Pays?
© International Group Program
The IGP System
• Example: Country A
• Group Term Life contract Number of Lives Insured 1,000 Premium 200,000 Claims 120,000 Local Dividend 16,000 Commissions 20,000
Premium, claims, commissions, local dividend etc. are paid in local currency. For IGP reporting purposes, these amounts are converted to US Dollars.
May 20, 2016 19
Local (First) Stage Accounting
© International Group Program
The IGP System
May 20, 2016 20
Second Stage Accounting (SSA)
Country A FSA (Local Conditions)
Country A SSA
Number of lives 1,000 1,000
1. Premium 200,000 200,000
2. Claims 120,000 (60%) 120,000 (60%)
3. Local Dividend 16,000 (8%) 16,000 (8%)
4. Commissions 20,000 (10%) 20,000 (10%)
5. Expenses & Risk 44,000 (22%) 30,000 (15%)
6. Balance (1-2-3-4-5) 0 14,000 (7%)
© International Group Program
The IGP System
May 20, 2016 21
Second Stage Accounting in Two Countries
Country A SSA
Number of Lives 1,000
1. Premium 200,000
2. Claims 120,000
3. Local Dividend 16,000
4. Commissions 20,000
5. Expenses & Risk 30,000
6. Balance (1-2-3-4-5) 14,000
Country A SSA
Country B SSA
1,000 500
200,000 50,000
120,000 30,000
16,000 0
20,000 4,000
27,000 9,000
17,000 7,000
© International Group Program
The IGP System
May 20, 2016 22
Second Stage Accounting in Three Countries
Country A Country B Country C Total
Number of Lives 1,000 500 800 2,300
1. Premium 200,000 50,000 120,000 370,000
2. Claims 120,000 30,000 85,000 235,000
3. Local Dividend 16,000 0 0 16,000
4. Commissions 20,000 4,000 2,400 26,400
5. Expenses & Risk (1-2-3-4) 25,000 8,500 15,600 49,100
6. Balance (1-2-3-4-5) 19,000 7,500 17,000 43,500
International Dividend
© International Group Program
The IGP System
May 20, 2016 23
Second Stage Accounting Principles
Margin Country A
Margin Country B
Margin Country C
International Dividend
Parent Company
© International Group Program
The IGP System
May 20, 2016 24
SSA (Second Stage Accounting) in Three Countries – High Claims
Country A Country B Country C Total
Number of Lives 1,000 500 800 2,300
1. Premium 200,000 50,000 120,000 370,000
2. Claims 120,000 30,000 115,000 265,000
3. Local Dividend 16,000 0 0 16,000
4. Commissions 20,000 4,000 2,400 26,400
5. Expenses & Risk (1-2-3-4) 25,000 8,500 15,600 49,100
6. Balance (1-2-3-4-5) 19,000 7,500 -13,000 13,500
International Dividend
© International Group Program
The IGP System
May 20, 2016 25
SSA in Three Countries - Very High Claims
Country A Country B Country C Total
Number of Lives 1,000 500 800 2,300
1. Premium 200,000 50,000 120,000 370,000
2. Claims 120,000 30,000 240,000 390,000
3. Local Dividend 16,000 0 0 16,000
4. Commissions 20,000 4,000 2,400 26,400
5. Expenses & Risk (1-2-3-4) 25,000 8,500 15,600 49,100
6. Balance (1-2-3-4-5) 19,000 7,500 -138,000 -111,500
Loss Carried Forward
© International Group Program
The IGP System
May 20, 2016 26
Second Stage Accounting Principles
Margin Country A
Margin Country B
Deficit Country C
International Dividend
Parent Company
© International Group Program
The IGP System
May 20, 2016 27
Second Stage Accounting - IGP Principles
Multinational Parent
Company
Ireland Subsidiary
Thailand Subsidiary
Colombian Subsidiary
IGP (John Hancock USA)
Irish Life Muang Thai MAPFRE
Broker Broker
International Dividend
Parent – Subsidiary Relationship
Agreement of Reinsurance & Pooling
Local Group Insurance Contract
Firs
t Sta
ge A
ccou
ntin
g
Seco
nd S
tage
Acc
ount
ing
Pool
ing A
gree
men
t (A
pplic
atio
n Fo
rm)
© International Group Program
Introduction to IGP
Loss Carried Forward (LCF)
• Overall financial result: Positive:
‐ Dividend paid. Negative:
‐ Resulting loss carried forward
• A unit’s loss will be carried forward for max. 5 years
May 20, 2016 28
Arrangements for Any Size Account
Full Stop Loss
• Overall financial result: Positive:
‐ Dividend paid. Negative:
‐ Resulting loss waived
• Different levels possible
Small Groups Pool (SGP)
• Overall financial result: Positive:
‐ SGP dividend paid Negative:
‐ Resulting loss will not be carried forward in client’s account
• Available for < 1,000 lives
• No risk exposure
Captive Reinsurance
• Risk borne by Captive
• Risk ceding only
• Risk ceding & premium transfer
IGP Subsidiary Pool
• Solution if parent company does not have an IGP pool
• Participants’ experience is combined and then included in the Small Groups Pool
© International Group Program
The IGP System
May 20, 2016 29
IGP Small Groups Pool
$
+
+
+ +
-
-
-
+
+
$ $ $ $ $
© International Group Program
The IGP System
• Some facts & figures (@ 9/30/2015):
• Oldest and largest of its kind in the world Around 245,000 employees >1,600 subsidiary contracts >$330 million premium
• Last 5 year average result (2011-2015): 13.94% of each client’s positive experience
has been paid back as International Dividend
May 20, 2016 30
Small Groups Pool
© International Group Program
IGP Meets Employers’ Needs
31
Service
© International Group Program
Key Topics
IGP Multinational Pooling
The IGP System
Going Forward Win-Win
Where do we go from here? How can we help you?
© International Group Program
Going Forward...
33
Future Cooperation
© International Group Program
Going Forward…
34
Different Steps to Take
Informing the
Subsidiaries & IGP
Plan Implementation
& Pool Expansion
Benefits & Pooling Strategy
Local meetings and proposals
© International Group Program
Going Forward...
• Material to facilitate your communication: IGP Country Profiles “The Local Perspective” Poolable & Non-poolable coverages in IGP Sample letters
‐ to introduce the IGP Network Partner to your local management ‐ to accompany the IGP proposal ‐ employee benefits questionnaires
www.igpinfo.com
35
How can IGP help you?
© International Group Program
Key Topics
IGP Multinational Pooling
The IGP System
Going Forward Win-Win
A win-win situation for all parties
involved
© International Group Program
Your Benefits Mean the World to Us!
• 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
• Efficient and high-quality reporting and information
• Diverse and extensive product portfolio
• Arrangements for any size account
• Solutions available for TCNs and Expatriates
37
IGP Pooling – Your Best Choice:
© International Group Program
IGP Pooling: A Win/Win Situation
• Cost-Savings: Contracts can generate a potential International Dividend to be shared
with the multinational client Plan surplus can be paid to local subsidiary Important savings possible from well-managed pool
• Information Effective global benefits management Centralized annual accounting
• Cash flow
38
For Multinational Corporations
© International Group Program
IGP Pooling: A Win/Win Situation
• Protection for the Network Partner through reinsurance
• Reputation of an ‘international player’
• Major distribution channel (access to new business opportunities)
• Better retention of clients (increased customer loyalty)
• Exchange of knowledge
• New product development
39
For the IGP Network Partners
© International Group Program
Key Topics We Discussed
IGP Multinational Pooling
The IGP System
Going Forward Win-Win
Introduction to IGP with historical background,
organisation and key figures
What is multinational
pooling?
Why is IGP your best choice? How
does it work in IGP, including types of
products and examples.
Where do we go from here? How can we help you?
A win-win situation for all parties
involved
© International Group Program
Questions & Answers
© International Group Program
www.igpinfo.com
Contact Info
Bartosz Racino John Hancock / IGP Europe
+32 2 775 29 42 [email protected]
Senior Account Representative