LifeInsuranceConferenceFinal JFourlis

Warren Buffett says: More bad news on pension funds during next decade
2nd Annual Life Insurance Forum

Global Trends in Pensions & Investments
J. Fourlis International Life Group General Manager
April 2014
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Warren Buffett says: More bad news on pension funds during next decade
In his annual letter to Berkshire shareholders, Buffett said: "Local and state financial problems are accelerating, in large part because public entities promised pensions they couldn't afford
J Fourlis Fleming Europe 2nd Annual Life Insurance Forum - April 2014
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Global Mapping - Pension Systems
In most of the OECD member countries, citizens that are above the retirement age receive public pension from the social security funds which are funded on a pay-asyou-go basis. Despite this public pension private pensions play an important role even in countries like France, Germany and Italy where traditionally the pension system is based on public expenditure.
In countries like the US, the UK and Switzerland, the biggest part of the pensions expenditure is covered by the private sector given that most of the employers have formed occupational pension schemes in order to provide pensions and related benefits.
Pension systems like the 401(k) and the IRAs (Individual Retirement Accounts) in the US, have been created in order for the employees to contribute from their disposable income, before or after tax, with the employer matching those contributions. Income and capital gains that are generated from the investments of those pension plans are tax exempt thus creating a significant competitive advantage if held for longer periods of time.
Occupational pension schemes in the UK were created according to the Pensions Act and operate in a similar manner.
Traditionally, employers offered to their employees participation in defined benefits occupational schemes where the employee following his/her retirement would receive a predetermined benefit (e.g. percentage of the last salary). C + I = B (contributions + investment earnings = benefits)
Most of the occupational schemes available are defined contributions schemes may also facilitate the mobility of the employees between employers.
Global Mapping
Global Mapping - Global Pensions Assets Study 2014 - TowerWatson
At the end of 2013 pension assets for the 13 markets in the study were estimated at USD 31,980 bn, representing a 9.5% rise compared to the 2012 year-end value.
Pension assets relative to GDP reached 83.4% in 2013, which represents a 7.8% increase from 2012 ratio of 75.6%.
The largest pension markets are the US, UK and Japan with 59.0%, 10.2% and 10.1% of total pension assets in the study, respectively.
It is important to caveat the impact of the currency exchange rates when

measuring the growth of pension assets in USD, as in many cases the results vary significantly with those in local currency terms.

Global Pensions Assets Study 2014 Evolution 2003 -2013
Global pension assets vs. GDP in local currency
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Pension asset allocation Aggregate P7 asset allocation from 1995 to 2013
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Pension asset allocation P7 in 2013
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European Institutional Marketplace

Strategic Asset Allocation by country
Mercer 2013 European Asset Allocation Survey J Fourlis Fleming Europe 2nd Annual Life Insurance Forum - April 2014
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Strategic Asset Allocation by Plan Size
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Changes in Strategic Asset Allocation by Plan Size
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Investments & Pensions Regulations in Europe
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Impact of New Regulations over Insurance

In terms of organization within the insurance company sector, a very likely effect of the new regulation could be: a progressive specialization of insurance companies based on product type; specifically a preference to supply those that were low risk and thus did not consume capital. In this regard, life insurance companies could also distance themselves from products offering long-term guarantees and instead offer those with returns that better reflect the changing conditions of the market (unrelated products, variable annuities). Simultaneously, there may be a hike in prices applied in order to increase available capital and transfer risk to the consumer
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Overall impact over the I&P industry Solvency II
Depending of risk situation of each company-country:
Transfer more risk to reinsurance companies or in the form of securitization.

Transfer more risk to clients and increase of fees. Greater use of derivatives for hedging purposes, interest rate swaps, particularly on
swaps and futures, inflation swaps and equity options.

Insurance companies will attempt to minimize the duration gap between assets and liabilities, since the risk associated with this gap must be covered by capital. In the present status quo long-term bonds issued by the governments of the EEA and
other countries with a high-credit rating are expected to be particularly favoured.
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Overall impact over the I&P industry Solvency II

Businesses with commitments to a return on the investment of various products may need to find higher-yield assets (thus with a greater risk and greater capital consumption). Gradual disappearance of DB pensions funds, as companies cease offering DB plans in favour of the DCs, considering that the latter are risk-free products
for the company and do not generate capital consumption.

Longevity risk hedging and a low-interest rate scenario are pushing up the price of pensioners life annuity, which is a problem for the system if it wants to provide sufficient and adequate pensions. In a low-interest rate scenario, DC pension funds accumulate fewer assets, which may reduce the attractiveness of these kinds of savings with respect to others (e.g. real estate assets) as a means of ensuring retirement funds.
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Target Date Retirement Funds
Tactical and strategic asset allocation management Flexibility to change as environment changes Volatility managed Can be customized to reflect clients best investment ideas Open architecture
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Target Date Retirement Funds - Glidepath
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Investment Advantages for Members
Clear investment objective, run to a retirement window Professional asset management Active asset management Volatility management Updated to take account of changing: Investment environment
New investment ideas

Member retirement patterns and needs
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2013 Greek Retirees
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John Fourlis
John Fourlis
International Life Group General Manager Mr. John Fourlis is the Group General Manager at International Life. John has 25 years of experience in the field of Financial Services, he has served, among others, as Regional Development Director of Zurich Financial Services Group in Asia, Vice President of AIA (ex AIG company), Executive Director of Alpha Trust Investment Services SA, Board Member of Taylor Young Investment Management Ltd., Marketing Director of Schweiz Group (ex Swiss Re company), Member of the Board and Fund Manager of Schweiz Fund MFMC. He holds a Bachelors degree in Business Administration (BSc.) and a Masters degree in the field of International Business Administration (MIBA) from Alliant International University in San Diego, USA.
Contact Details Email: Jfourlis@inlife.gr
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Warren Buffett says: More bad news on pension funds during next decade

2nd Annual Life Insurance Forum

Global Mapping - Pension Systems

Global Mapping - Pension Systems

Global Mapping - Pension Systems

Global Mapping - Global Pensions Assets Study 2014 - TowerWatson

It is important to caveat the impact of the currency exchange rates when

Global Mapping - Global Pensions Assets Study 2014 - TowerWatson

Global Mapping - Global Pensions Assets Study 2014 - TowerWatson

Global Mapping - Global Pensions Assets Study 2014 - TowerWatson

Global pension assets vs. GDP in local currency

Global Mapping - Global Pensions Assets Study 2014 - TowerWatson

Global Mapping - Global Pensions Assets Study 2014 - TowerWatson

European Institutional Marketplace

European Institutional Marketplace

European Institutional Marketplace

Changes in Strategic Asset Allocation by Plan Size

Investments & Pensions Regulations in Europe

Impact of New Regulations over Insurance

Overall impact over the I&P industry Solvency II

Depending of risk situation of each company-country:

Transfer more risk to reinsurance companies or in the form of securitization.

swaps and futures, inflation swaps and equity options.

other countries with a high-credit rating are expected to be particularly favoured.

Overall impact over the I&P industry Solvency II

for the company and do not generate capital consumption.

Target Date Retirement Funds

Target Date Retirement Funds - Glidepath

Investment Advantages for Members

New investment ideas

2013 Greek Retirees

Contact Details Email: Jfourlis@inlife.gr

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