After century-long fight, US enacts health reforms. President Barack Obama has signed into law historic, sweeping reforms that lay out health care coverage for almost every American and realize the dreams of generations of past US leaders. Two fund houses have given their view about the impact of the event:

UOBAM 25th March 2010

Last Sunday, the US House of Representatives passed the US Health Care Reform Bill, and the response of the market was a broad rally in Healthcare stocks. The Healthcare sector had underperformed the wider market in 2009 because of the uncertainty over the reforms. The Reform Bill is more modest than what the market feared and the impact on the earnings of the healthcare sector is less than what the market has priced.

This removal of headline risk and the increase in clarity should benefit Healthcare stocks in the months ahead. Valuations of the Healthcare sector are at 20-year lows. The sector is also under- owned as uncertainty over the reforms has kept investors on the sidelines. We continue to be positive on the long term outlook for the Healthcare sector. The demand for Healthcare will continue to rise as the populations in the Developed Economies are ageing while those in the Emerging Markets are becoming more affluent. There are also still significant unmet needs in Healthcare and the truly innovative companies will continue to be rewarded.

Franklin Templeton 23rd March 2010

The legislation is designed to extend health care coverage to more than 32 million uninsured Americans—a market expansion that could potentially benefit drug companies, hospitals, medical devices companies and even insurers, though they may face challenges as the insurance business model changes.

The passage and signing of this bill into law marks the end of the legislative process, but only the beginning of the implementation and execution process, ultimately leading to coverage expansion of the uninsured starting in 2014. With clarity on the legislative front, we expect investors to revert back to evaluating the core fundamentals of the health care sector, where the strong secular growth opportunity may lead to potential outperformance. In general, we view the health care sector as a fertile area of investment due to demographics and innovation.

After selling AIA to Prudential for $35.5 Billion, American International Group Inc. agreed to sell a division to MetLife Inc. for $15.5 billion in the bailed-out company’s second divestiture of a non-U.S. life insurance unit this month.

March 8 (Bloomberg):  MetLife will pay $6.8 billion in cash and $8.7 billion in equity securities for American Life Insurance Co., the buyer said today in a statement.

…

AIG’s stake in MetLife may be about 14 percent in 2011 and could rise to as much as 20 percent with the conversion of some of the equity to common shares, Wheeler said. He said he doesn’t expect the holding to reach 20 percent because AIG may cut its holdings. The Fed also will be entitled to proceeds from the eventual sale of $10.5 billion in securities to be acquired from Prudential, AIG said last week.

20 Million Customers

Alico (American Life Insurance Co) has more than 20 million customers and 12,500 employees, AIG said today. The unit posted about $2.2 billion in pretax operating income last year, a 16 percent increase from $1.9 billion in 2008, MetLife said in a slide presentation. The business had $89 billion in assets under management as of the end of 2008. MetLife said it expects to retain “almost all” of Alico’s employees.

Read the full story at Bloomberg

AIA has recently launch a new Investment-Linked Policy, called Asset Evolution, with a concept similar to unit trust. There is neither minimal holding period nor insurance coverage for this plan.

The premium charge is 4 percent with mininum Initial investment of $5,000 with unlimited free switches

There are about 150 ILP funds available for selection currently.

My two cents:

AIA is trying very hard to re-gain market share after AIG saga and they have successfully re-branded themselves and also opened up their products to Independent Financial Advisers like us. The management mindset has changed and now they are more innovative and willing to change.

However, as their core business is still life insurance and the product is only distributed via their agency force. the sales team may lack of experience in the investment  field. Also, as the product offers one-time commission,  the advisers may have less motivation to assist their client’s for ongoing monitoring and updates.

In fact, similar product was available for long. for example,

• Friends Provident – Wealth Builder and Wealth Manager
• Zurich – Vista

I will write more about these two in the future. Meanwhile, you can contact me if you need more information about the products.

NEWS of life insurer American International Assurance’s (AIA) impending control by the United States government caused few ripples in Singapore, as the industry mostly held a positive view of the development while policyholders here hardly bat their eyelids.

Ratings agency :Standard and Poor’s removed AIA from credit watch, following parent company American International Group’s (AIG) announcement on Monday that it would turn over AIA equity stakes to the US government as repayment for a US$38 billion ($59 billion) federal loan.

To Mr :Stanley Jeremiah, council member of the Singapore Insurance Institute, the move will be “better” for AIA, as it reaffirms the US government’s commitment to keeping the life insurance firm viable.

AIA agents said they received hardly any queries from their clients — unlike last September, when AIG revealed it was heavily exposed to toxic mortgage assets in the US. The news at the time prompted concerned policyholders to flock to AIA service centres here with questions and requests to terminate policies.

“There were so many calls then — everyone was worried about his retirement funds, his savings,” an AIA insurance agent with 15 years’ experience told Today. She cannot be named as company policy does not allow her to speak to the media.

“Today, I only got one call. Last year, I was receiving eight to 10 calls a day on top of me pro-actively contacting my clients,” she said.

AIA Singapore recently sought to renew customer confidence by reaffirming their capital adequacy ratio here was over 200 per cent — which is above the minimum 120 per cent required by the Monetary Authority of Singapore. This indicates that AIA is more than able to pay claims.

Yesterday, AIG’s general insurance arm also came out to strongly state its financial position in Singapore.

AIG is setting up a general insurance holdings company, which will include American Home Assurance (AHA).

AHA, which is Singapore’s largest general insurer, said its capital adequacy ratio stood at 205 per cent as at Dec 31, up from 150 per cent in September. “The reason we raised the ratio is to give the market more comfort in terms of our solvency and ability to pay claims,” said AHA Singapore president Kevin Goulding.

The general insurer said it also has liquidity of over $170 million in cash and $656 million in assets. Last year, it paid more than $200 million in claims and handled 122,000 new claim cases.

This quarter, it is even seeing “slight uplift” in its consumer arm, said AHA.

Source: Today Online