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Reinsurer Swiss Re has agreed to pay $6.8bn (4bn) for the insurance unit of industrial giant General Electric.

Swiss Re will sell $7.5bn of new shares to finance the acquisition and cover the debts of GE Insurance Solutions.

Buying the firm will turn Swiss Re into the world’s largest reinsurance company at a time when premiums are set to rise following problems such as hurricanes.

Analysts say the sale will allow General Electric (GE) to focus on quicker growing areas of business.

Uneasy fit

“Insurance Solutions has been a tough strategic fit for GE,” said company chairman and chief executive Jeff Immelt.

“Over the last five years, the Insurance Solutions business has lost $700m and required the infusion of $3.2bn of capital.”

GE, the world’s largest company by market value, has been cutting its insurance operations and already has sold units to firms including Warren Buffett’s Berkshire Hathaway.

Unsurprisingly, Swiss Re’s chief executive John Coomber was more flattering about the company he was buying, saying Insurance Solutions was a “powerful business fit offering tremendous opportunities to strengthen our franchise”.

The company is based in Kansas City, Missouri, and had net premiums of $6.2bn last year. At the end of June, the it had assets worth a total of $41.5bn.

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An American insurance company is set to create 120 jobs in Northern Ireland.

American Life is part of the American International Group - one of the 10 largest companies by turnover in the world.

It currently employs 25 people at its headquarters in Belfast.

The company’s offices were opened on Monday by Cathy Hurst public affairs attache from the American Consulate General.

The firm said it wanted to recruit a sales force of consultants.

Belfast Branch Manager Patrick O’Donnell said: “We’re looking to build a total sales force of 500 across Ireland, with around 150 consultants in Northern Ireland.

“A number of other insurance and financial services providers have shut down their sales force and stopped face-to-face meetings with customers over recent years.

“But American Life has built its reputation and business on the local community approach - selling financial solutions to real people - and that is what we are intending to do here in Northern Ireland.”

Enterprise Minister Ian Pearson said he was delighted by the American Life move.

“They are one of the most significant insurance companies worldwide,” he said.

“Their arrival in Northern Ireland is a positive endorsement of the strength of the local economy.”

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US Treasury Secretary John Snow has asked India to consider opening its financial, insurance and pension fund sector to foreign investors.

Mr Snow, who is on a five-day visit to India, said opening of these sectors would provide funds to improve roads, railways, ports and power plants.

He met Indian business leaders and is scheduled to meet the PM and finance minister later in the week in Delhi.

The US is one of the largest investors in India.

‘Potential’

Mr Snow told journalists after a visit to the National Stock Exchange in Mumbai (Bombay): “The financial sector is the nerve of any economy. It has so much potential here.”

He said India could only benefit from greater openness.

“Infrastructure issues are at the forefront of India’s future. But infrastructure needs to get financed,” he said.

“US firms have opportunities here and we want to encourage the reform movement.”

On Monday, Mr Snow had visited Asia’s largest slum, Dharavi in Mumbai.

He also visited members of a women’s organisation that uses micro-credit to finance small businesses as well as urgently needed housing.

An estimated 50% of Mumbai’s population lives in shantytowns, open spaces or on pavements.

During his visit, Mr Snow is also expected to focus on the World Trade Organisation trade talks in Hong Kong in December.

India is an influential member of the WTO and the US wants it to use its influence to bring about a trade agreement in the 148-member organisation.

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The Halifax bank has been criticised by the advertising watchdog over a “misleading” mailing to customers.

The mailshot, sent to 120,000 mortgage holders with subsidiary Intelligent Finance, asked customers to reveal details of their contents insurance.

The Advertising Standards Authority (ASA) upheld a complaint that Halifax had “no good reason” to request details of customers’ contents insurance.

Halifax agreed to destroy information obtained through the mailing.

Compliant

The mailing included a request for customers to outline details of their contents and building insurance, including any renewal date.

The member of the public who complained about the mailing said the bank was trying to obtain information for marketing in the future.

In response, the Halifax said that as the lender it was entitled to request insurance details.

In its adjudication, the ASA said the bank was wrong to ask for details of their mortgage holders contents policy.

According to the ASA the bank’s letter “misleadingly implied that the advertisers (the Halifax) needed information about the recipients’ contents insurance for their records”.

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The students at St Columba’s College in St Albans are taking finance very seriously. They are studying it as part of the Institute for Financial Services curriculum.

All the boys are taking their AS levels and in addition are taking an IFS course (an AS level equivalent qualification). The course looks at the structure of the banking industry and how it came to be that way.

Enterprising

In addition to the theory the students have set up a company called magine which is a Young Enterprise Company. This scheme encourages young people to get together and run their own company.

magine makes cufflinks out of coins and they sell for roughly 4-8 to other boys at the school.

Financial lessons

The boys were amazed to learn in a recent newspaper article that 46% of 16-year-olds didn’t know the difference between credit and debit cards.

So they decided to design and produce their own product to help students understand personal finance better.

The CD-Rom presentation is called “Financial advice for the teen earner” and gives basic tips on just about every aspect of school life:

Shares in Yell, the owner of the Yellow Pages directories business, were in healthy demand as London’s biggest flotation in two years was launched.

At the start of the day Yell shares rose to 306p from 285p in conditional trading - dealing between big city banks ahead of the official start of trade - but by lunchtime had settled back to 292.25p.

The price slid further to close at 289.5p, 1.6% higher than its debut.

The pricing of Yell shares at 285p gives the total group a market capitalisation of about 2bn ($3.2bn), making it large enough to enter the FTSE 100 list of top companies.

The flotation, which was cancelled last summer because of poor market conditions, is the largest so far this year and is seen by some analysts as a sign of renewed confidence in the stock market.

Official trading in Yell’s shares is due to start on 15 July, which is when private investors will be able to buy the shares.

Strong response

“We are delighted with the way new investors have embraced the Yell story,” said chief executive John Condron.

YELL GROUP Publishes Yellow Pages and Business Pages UK telephone directories Operates Yell.com, the online directory service Operates Yellow Pages 118 247, a telephone directory service (formerly called Talking Pages) Publishes Yellow Book directories in the US Had a turnover of 1.1bn in 2002/03 Employs 7,800 people (3400 in UK)

“The strong response to the Yell share offer reflects the quality and potential of the business.”

The telephone directories business was bought by private equity firms Apax and Hicks, Muse, Tate & Furst from BT Group in 2001.

They will continue to hold 30% of the listed company with Yell management and staff holding 5%.

Appetite returns

Yell is the biggest firm to come to market since insurance group Friends Provident floated in 2001.

Neil Austin, head of new issues at KPMG Corporate Finance, said the float was an encouraging sign that the market could be about to pick up.

“I think it does signal that the appetite’s come back,” Mr Austin told BBC Radio Five Live.

“We’ve had twelve months of complete silence with institutions sitting on their hands - this shows there is some appetite there.”

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Store cards that charge interest at 25% or more a year will have to warn customers on their statements that they can get cheaper credit elsewhere.

The measure is being imposed by the Competition Commission to help prevent store card holders being overcharged.

The commission found that the annual percentage rates (APRs) on store cards were too high.

As a result it calculated that store card users have been overcharged by at least 55m a year.

“Retailers and store card credit providers are, we have found, effectively insulated from competitive pressures,” said commission deputy chairman Christopher Clarke.

“The consequence is that store cardholders who take up credit and associated insurance pay too much.”

More information

The watchdog’s investigation into store cards was launched in March 2004 at the request of the Office of Fair Trading.

Excess prices paid for credit and insurance on store cards has been at least 55 million a year and possibly significantly more Competition Commission

Last September, the commission, in a preliminary report, said consumers were being overcharged due to inflated interest rates.

It found a lack of competitive pressure on either the annual percentage rates (APRs) charged or the cost of associated insurance.

The commission now says store card credit providers must:

• where APRs are 25% or above, warn cardholders on monthly statements that cheaper credit may be available elsewhere.
  

• give more and better information on all monthly statements.
  

• offer the option to pay by direct debit.
  

• offer payment protection insurance separately from other elements of store card insurance.

The credit card industry, following a parliamentary Treasury Select Committee enquiry into UK debt, agreed to introduce similar warnings on statements in 2004.

The Finance & Leasing Association (FLA), the trade body for the card companies, welcomed most of the commission’s proposals.

But it said it was worried about highlighting charges in excess of 25% a year:

“At first sight, the APR warning notice appears to be an attractive, simple transparency measure. But we are concerned that it may really be a back door cap, harming vulnerable consumers.

“The remedy could harm the most vulnerable consumers, who would be rendered unprofitable to serve by store card providers and whose alternative forms of credit are at higher APRs than on store cards” said the FLA.

Card users overcharged

Although the average APR being charged by store cards has come down slightly in the last year or two, the commission found that the card companies are charging interest at 10-20% above a level that would reflect the costs of providing the cards and generating a reasonable level of profit.

The result is that the average store card APR has been 26.5%.

The Commission estimates that by the end of 2006, 90% of store card accounts will still be charging interest of at least 25% a year.

It also discovered that the APRs charged on many store cards cluster around the 30% level.

By comparison nearly all credit cards - 95% of them - are cheaper, charging interest of 26% or less each year.

This has led to store card users being overcharged by at least 55m a year and “possibly significantly more”, the commission said.

Which? formerly known as the Consumers Association, said people should avoid store cards at all costs and choose a cheap-rate credit card instead:

“Given that the average credit card APR is 15 per cent, all those people with APRs between 15 per cent and 25 per cent are already borrowing at a very expensive rate and will have no warning that they could be borrowing more cheaply” said Which?

The market

The number of store card accounts in use has been declining and had dropped to 11.4 million by the end of 2005.

But with 70 different retailers offering them they are still an important source of credit for shoppers.

The commission does not accuse retailers of conspiring to cheat their customers.

Instead it points the finger at the way the whole market operates.

Among the features it highlights are that:

• store cards are often sold as a way of getting cheap offers on goods rather than on the basis of their APRs.
  

• customers are not sensitive to the APRs or late payment charges on store cards.
  

• customers do not understand the cost of buying insurance policies such as payment protection insurance which is often bundled into the cost of the card.
  

• card statements do not provide enough information about the charges being levied.
  

The commission believes that greater transparency would bring more competitive pressures into the supply of store cards, thus bringing charges down.

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Several of Thursday’s papers made late changes to their front pages to report on the discovery of a dead swan in Scotland carrying a bird flu strain.

The Guardian leads with the discovery, saying it triggered a number of emergency responses.

The Sun says a massive public protection operation will swing into action if the swan proves to have had H5N1, which can be deadly to humans.

The Times says scientists and vets have been waiting for H5N1 to reach the UK.

‘Howls of protests’?

The spectre of the Labour government of the 1970s intent on squeezing the rich until the pips squeak is raised by the Daily Telegraph.

It says millions of wills and insurance policies could be hit by a new backdated levy on trusts - due to be fleshed out in Friday’s Finance Bill.

Seven accountants, lawyers and investment managers have written to the Times protesting at the changes.

The Daily Mail reports “howls of protest” at the plans.

Donaldson questions

The murder of British agent Denis Donaldson in his remote cottage in Donegal leads to speculation about the effect on the peace process.

The Mail shows a picture of him next to hunger striker Bobby Sands emphasising his role in the republican movement.

The Independent’s David McKittrick says the hearts of those wanting peace will sink if republicans are to blame.

The Times wonders why Mr Donaldson ignored police warnings and did not try and run away.

Walking on… ice?

The Daily Mirror details the latest blow for Britain’s smokers - Marks and Spencer’s staff are banned from lighting up in public in their uniforms.

A leaked memo says staff must ensure no logos or anything to link them with the firm can be seen when smoking outside.

US and Israeli scientists have come up with an explanation of how Jesus walked on water, the Guardian says.

They think he may have been supported by a thin layer of ice formed during unseasonably cold weather.

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The insurance company’s shares will start trading next Monday on the stock market.

But current members have until 1000 BST on Wednesday to decide if they want to cash in by selling their windfall shares immediately.

They, along with ordinary customers and staff, must also decide by then if they want to do the opposite and increase their shareholding.

They can do this by subscribing to buy more shares, which are being offered to them with a 5% discount to whatever turns out to be the eventual flotation price on Monday.

Buying

Cliff Freeman, from Northiam in Sussex, gets a pension from a Standard Life policy.

Cliff Freeman hopes to get 5,000 worth of shares

As such he is not eligible for any windfalls as he is not a member.

But he is part of the wider group of customers and staff who can apply for preferential shares with the discount.

He says he has applied for 5,000 worth of them because he wants to enhance his savings.

“I don’t know how many I’ll get. They may be scaled back and I might get just 10% of the amount I asked for.”

Hanging on

One Standard Life member, Mark Hickey from Woodford Green in north-east London, will be getting some windfall shares.

Mark Hickey plans to hang on to his windfalls

He is going to hang on to them but will not buy any more.

“I don’t have any immediate need for the cash and I don’t think there’s any point in selling them while the market is flat,” he said.

“Also, no one knows what the value of the shares is yet, so you’d be selling them blind. I’ll hang on for a year to get the bonus shares. They may even be worth more if there’s a takeover.”

That is a point emphasised by independent financial advisor Jonathan Fry.

“The insurance industry has too many players and is very competitive. The chances of a possible takeover do seem high and that would almost inevitably push up share prices,” he said.

“The main downside is that it is very difficult to assess the timescale. It might not happen quickly so I’d be cautious about buying more shares.”

Bonus shares

People who keep their new shares for 12 months continuously will get bonus shares in a year’s time, at a rate one for every 20 they have held.

If the share price were to be unchanged that would be the equivalent of a 5% bonus on the initial holdings.

But financial advisors are pointing out one important wrinkle.

If the shares are put into an individual savings account (ISA) they will forfeit this bonus.

That is because transferring them to an ISA technically involves buying and selling them back, thus undermining the idea that they have been held continuously.

The same applies to shares put into a Self Invested Personal Pension (SIPP) as the shares are in fact sold to the SIPP.

The pricing of the shares by Edinburgh-based Standard Life and its advisors will take place after the stock market closes this Friday.

The debut price for the shares will be announced over the weekend and trading will start on Monday.

Cheques for any windfall shares that have been sold back to Standard Life will be sent out after that and all other documentation should be sent out by 17 July.

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Six million people are to get a letter from their pension provider advising them to review their move to contract out of the State Second Pension (S2P).

People will be told to reassess if they would be better off paying into the S2P rather than their private pension.

The pensions industry said the letter was part of an initiative to inform and educate consumers.

But one consumer group fears the letter does not give enough practical advice to people for them to make a decision.

Growing concern

The S2P is the new additional pension system.

We believe the situation is so serious that we are calling upon the Financial Services Authority (FSA) to conduct a full market analysis Tereza Fritz, Which

It replaced the State Earnings Related Pension (Serps) on 6 April 2002.

If you contract out of the S2P into a personal pension scheme, such as a stakeholder, you will pay the same National Insurance contributions.

And the Inland Revenue should top-up that personal pension, through an annual rebate, with the amount equivalent to what you will have paid towards your additional state pension.

However, there has been growing concern that consumers could have been badly advised by financial advisers to contract out.

Shortfall

Which, formerly known as the Consumers’ Association, has estimated that some people are in line to receive 60% less pension than they would have received if they had not opted out of the state scheme.

The letter being sent to six million people has been put together by two finance industry bodies, the Association of British Insurers (ABI) and the Association of Independent Financial Advisers (AIFA).

The letter will advise consumers of the following:

• They should review their decision to stay opted out of the S2P each year

• Contracting out should not be based solely on the expectation that a bigger pension will be secured

Pensions minister, Malcolm Wicks MP, welcomed the industry initiative describing it as providing “a balanced view of the issues involved in contracting out.”

However, Which said that the letter left people “in the dark” about what to do next.

“We believe the situation is so serious that we are calling upon the Financial Services Authority (FSA) to conduct a full market analysis to determine if there has been significant market failure in this area,” Tereza Fritz, Which spokeswoman, said.

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