The 2008 economic downswing has effected fiscal establishments worldwide. The life and pensions industry in Ireland is presently runing at about 50 % of its volume of 2007 ( David Glennon, 4, 2010 ) . Despite the value of Zurich Life/ Eagle Star ‘ s investing fund falling by 30.5 % over the class of 2008, Zurich Life Plc managed to surpass it ‘ s cardinal rivals during this volatile period as shown in figure 1. Irish_pension_funds_Jan062009
Figure 1 Pension Investing Fundss 2008. Beginning: Finfacts, 2009.
Zurich Life ‘s cardinal rivals in Ireland are the chief Irish Bankss –
Irish Life & A ; Permanent
Bank of Ireland
These establishments have seen their market capitalizations fall well, both Moody ‘s and Standard and Poor ‘s have downgraded the Irish bank ‘ s recognition evaluations. Zurich Life has been able to distinguish themselves from the Irish Bankss and show their fiscal strength in contrast to the ailing Irish Bankss which have required extended recapitalisation.
The pensions industry is confronting a ambitious hereafter as it seeks to happen steps to cover with the EU ‘s aging population. By 2051 50 % of Ireland ‘s current population will make the retirement age, this will see a treble addition in the Numberss who are over 65. Eurostat have predicted that when population growing rates are analysed in combination with in-migration anticipations, the ratio of people working to those retired will diminish from 6:1 to 2:1 by 2051 ( Eurostat,5, 2007 ) . It is estimated that the mean Irish citizen demands to salvage a‚¬9,100 more per twelvemonth to fund their retirement ( Aviva, 6, 2010 ) . A scheme that involves both the populace and private sector is required to turn to these issues.
The Irish Association of Pensions Funds published a study in 2010 called the “ Pension Investment Survey ” . This study stated that at the terminal of 2009 the entire value of Irish pension fund assets was a‚¬72.2 billion, this included both inactive and actively managed financess. It indicated that inactive investing is going the dominant investing manner in Ireland. This manner of investing efforts to reproduce market returns and does non try to surpass the market which is in contrast to active fund direction which attempts to bring forth excess market returns over market ( mark ) returns. Investing financess offering inactive financess have benefitted from this alteration of attitude to a more conservative attack. In 2000 inactive financess had a market portion of 1.5 % and had assets valued at $ 2.6 billion by the terminal of 2009 this had increased to $ 92 billion, this represented a 35 % market portion ( Sonya Morris, 7, 2010 ) .
Pestel Analysis of the Life and Pensions Industry
National Pension Reserve Fund – The IMF and the ECB approved a a‚¬85 billion eventuality fund with an involvement rate of 5.8 % for the Irish authorities and the Irish banking system in response to the serious solvency issues sing Irish Bankss. The Irish Bankss require the financess to cover the losingss sustained as a consequence of their overexposure to the prostration in monetary values in the Irish belongings market. As portion of the understanding the Minister for Finance Brian Lenihan has indicated that a‚¬10 billion may be used from the National Pension Reserve Fund to fund Ireland ‘s a‚¬17.5 billion input to the EU-IMF bailout announced in November 2010 ( Progressive Economy, 8, 2010 ) .
Tax policy – As portion of the authorities ‘s four twelvemonth recovery program pension revenue enhancement alleviation will be cut, it will now be an excess a‚¬32 per a‚¬100 euro to put in a pension strategy. Higher taxpayers will see the revenue enhancement alleviation rate they receive autumn from 41 % to 20 % for pension investing ( Tom Deegan, 9, 2010 ) . Salary decreases and additions in unemployment have affected people ‘s ability to go on to lend to their pension strategies.
The Irish Government has chosen to retain it ‘ s 12.5 % corporation revenue enhancement rate which it seen as critical in pulling and retaining foreign investing, retaining this low revenue enhancement rate is an of import portion of the Irish Government ‘ s recovery scheme that has been outlined in their four twelvemonth recovery program.
Employment – As a consequence of the current economic downswing the unemployment rate in Ireland is presently 13.2 % ( CSO, 10, 2010 ) , unemployment is forecast to stay high in Ireland in the coming old ages and is expected to stay over 10 % until 2014. ( CSO, 11, 2010 ) .
Political stableness – whilst the EU is a politically stable part as a whole, the current economic downswing and the asceticism measures being imposed by European authoritiess have sparked presentations across Europe in 2010. The agitation has contributed to market uncertainness and has put excess force per unit area on European authoritiess
Economic growing – After a negative growing rate of 8.2 % in 2009 the Irish economic system emerged from recession in 2010 ( CSO, 12, 2010 ) . Ireland is expected to see a growing rate of 0.1 % in 2010 and 1.75 % in 2011 ( Dept. Of Finance, 13, 2010 ) . The Eurozone economic system is expected to turn by between 1.4 % and 1.8 % in 2011, lead by strong economic growing rates in the German economic system ( IStock Analyst, 14, 2010 ) .
Interest rates – The ECB presently has an involvement rate of 1 % , the president of the ECB Jean Claude Trichet expects this rate to remain in topographic point until mid – 2011, the low involvement rate is a response to the uneven economic recovery that is presently underway in the EU.
Exchange rate – The on-going economic crisis in the Eurozone has seen a decrease in the value of the euro against the chief currencies of the US dollar and British Sterling. Exchange rates play an of import function in finding degrees of international trade and a lower value Euro is seen as of import for Irish exporters.
Deflation – In Ireland in 2010 monetary values have decreased by 0.8 % , this gives Ireland the lowest rate of rising prices in the EU ( Eurostat, 15, 2010 ) .
Pension Fund activity – Over the class of the first eight months of 2010 the norm managed fund has gained 3.4 % , this has seen returns range from a high of 6.0 % for Standard Life Investments to a depression of 1.6 % for Aviva Investors. Zurich Life ‘s entire Irish new concern increased by 5.2 % to a‚¬144.9m, this was a‚¬136.6m in September 2009 ( Zurich Life Plc, 16, 2010 ) . Over the past 12 months the mean fund returned 9.5 % . The returns gained over the past twelvemonth have ranged between 13.2 % for Standard Life Investments to 8.0 % for AIB ( Finfacts, 17, 2010 ) .
Population growing – The Irish population is expected to increase to 5 million by 2030 ( CSO, 18, 2010 ) . As this will see an addition in the figure of people measure uping for a pension, Ireland must follow steps to increase the work engagement rate of people in older age brackets i.e occupation sharing amongst older workers.
Age distribution – While the mean age of the Irish population is 35.4 which is less than the EU norm of 38.4 ( Eurostat, 19, 2010 ) , like most Western European states it has an aging population. Ireland is expected to hold an mean age of 39 by 2030.
Broadband – 100 % broadband coverage in Ireland will increase competition with foreign based houses as possible clients have easy entree to inside informations of their pension strategies and investing chances.
Online Systems – Investing financess are progressively traveling towards the usage of complete online systems, therefore cut downing staff degrees in their client services and disposal sections.
Pension Age – The age at which a individual becomes eligible for a pension will increase in 2014 to 66, in 2021 this will lift to 67 and by 2028 it will hold become 68.
Regulation – Increased ordinance is expected to guarantee transparence in respect to pension charges, the pensions board is expected to be allocated increased powers in the coming old ages. As of 2014 all workers over the age of 22 will automatically be enrolled in a new pension strategy that will see workers lend 4 % of their one-year wage, their employer will lend 2 % and the province will pay 2 % ( National Pensions Framework, 20, 2010 ) .
I have identified the following as the key drivers for alteration in the life and pensions industry-
Age Distribution – Europe ‘s aging population is traveling to increase the costs of supplying for retiring citizens. The EU will hold to turn to this future instability by farther enlargement or by presenting policies that will promote EU citizens to increase birth rates.
Regulation – With relaxed ordinance been held up as a major cause of the economic downswing and in peculiar the Irish banking crisis, reform of banking Torahs is set to increase in the coming old ages. In December 2010 Minister for Finance Brian Lenihan introduced sweeping alterations to the control the Irish Government has over the Irish banking sector.
Economic Growth – Each EU member has been set a mark of cut downing their shortage to within 3 % of their GDP by either 2013 or 2014. Increased revenue enhancement grosss will set authoritiess in a better place to cut down their shortages. A return to economic growing will see a decrease in unemployment in the EU and an addition in wages. This will guarantee people are in a better place to supply for their retirements.
Analysis of the Life and Pensions Market
As portion of the industry reappraisal I have conducted a five forces analysis of the life and pensions industry, this has been done to measure the current province of the industry and place countries of strength that can be improved upon.
Porters Five Forces Framework.
Potential New Entrants:
Suppliers: Competitive Competition Buyers:
High High Moderate
Potential new Entrants
Economies of graduated table – Large scale capital investing would be required by new entrants to put up and run a life and pensions fund, the cost of pull offing investing financess and of carry oning market research are considerable. Barriers to new entrants come ining the market include the experience curve effects that give officeholders a cost advantage over possible new entries.
High Differentiation – In a extremely competitory market merchandise distinction is important in pulling and retaining clients. Competing companies trade name their merchandises in a merchandise package with their other services, this gives them an chance to distinguish their merchandises further.
Legislation – The Irish authorities have begun to implement stricter regulations refering the banking sector in an effort to reconstruct assurance to the industry. The National Pensions Framework published in March 2010 poses serious challenges to the nucleus concern of companies runing in the industry. It contains proposals to cut revenue enhancement alleviation on pension parts along with cut downing other pension benefits. The cuts in authorities outgo and revenue enhancement additions in the Irish budget of 2010 increased further the challenges presently being experienced by those operating in the industry.
Retaliation – Incumbents would be expected to revenge should new participants enter the market. The investing financess that are in a healthy fiscal place could set about a policy of cut downing premium rates to cut down the attraction of the market or officeholders could set up a presence in the new entrant ‘s ain market.
Moderate menace of new entrants.
Menace of Substitutes
State pension – Proposals to cut revenue enhancement alleviation on pension parts along with cut downing other pension benefits as portion of the authorities ‘s four twelvemonth recovery program and the debut of a new province pension strategy in 2014 will increase competition within the industry.
Foreign Competition – New engineering is altering the concern environment in which Zurich Life operates. As entree to engineering additions through the rollout of broadband, Zurich Life will confront increased degrees of competition from their international rivals.
Excess Industry Effects – Throughout the class of the belongings bubble in Ireland, many people invested in belongings to supply for their retirement. With the subsequent autumn in belongings monetary values, this is no longer as an attractive option and people are progressively looking to diversify their investings to countervail possible hereafter falls in investing values.
Moderate menace of replacements.
Low Switch overing Costss – In today ‘s market place, exchanging between financess has become easier and more common. The costs of exchanging between financess are low and in the bulk of instances no excess charges are incurred.
Buyer Competition Threat – The menace of backward perpendicular integrating is low because of the big graduated table investing that is required in the operation of a life and pension fund.
Concentrated Buyers – The mark market for life and pension financess is in-between to high income earners who are in a place to supply for their retirements in extra to the province pension. Middle income earners have been negatively effected by alterations to revenue enhancement alleviation on pension parts announced in the 2011 Irish budget.
Moderate Buyer Power
Supplier Competition Threat – Over the class of 2009 and 2010 the nationalization, by the Irish authorities, of Bankss has contributed to the autumn in the value of their stockholders investings and in certain instances stockholder investings have been devalued wholly. This has lead to the prostration of portion monetary values as investors fear the complete nationalization of Bankss with big debts.
Concentrated Suppliers – There are a figure of participants runing in the industry, with the chief participants consisting of Irish Life & A ; Permanent, Bank of Ireland, AIB and Zurich Life Plc.
Supplier Power High
Competitor Balance – Companies runing in the life and pensions market have been under sustained force per unit area since the oncoming of the economic downswing. Irish Bankss such as Irish Life & A ; Permanent, Bank of Ireland and AIB have seen their market capitalizations reduced, both Moody ‘s and Standard and Poor ‘s have downgraded their recognition evaluations.
High Exit Barriers – The high issue barriers that exist in the industry have increased competition, as the companies runing in the industry battle to increase market portion. The big investings made by companies can be hard to sell and increased ordinance has restricted who pension financess can lawfully merchandise with.
Industry Growth Rates – Lower growing rates since the 2008 economic downswing has contributed to an addition in competition, Irish managed pension financess by 3.4 % in the 2nd one-fourth of 2010. This had an consequence of cut downing additions made earlier in the twelvemonth and has resulted in the norm managed fund increasing by 2.5 % since the beginning of 2010 ( Inside Ireland, 21, 2010 ) .
Competitive Rivalry Threat High
The industry has weathered the effects of the economic downswing and growing rates have returned to certain companies runing in the market. The Irish banking crisis continues to hold a negative consequence on growing rates as the handiness of recognition is a major issue for people and houses throughout the state.
Company Analysis – Zurich Life Plc
Zurich Life Assurance plc is one of Ireland ‘s largest fiscal services suppliers. Its nucleus merchandises are life confidence, pensions and investings. In Ireland, Zurich Life Assurance is based in Blackrock, Co. Dublin and employs over 600 people.
Founded in 1978, the company was originally known as Shield Life. In 1990, Shield Life became portion of the Eagle Star Group, which was owned by British American Tobacco Industries plc. In 1998 The Eagle Star Group was taken over by the planetary insurance company, Zurich Financial Services.
Headquartered in Zurich, Switzerland, the group employs over 60,000 people functioning clients in over 170 states ( Zurich Life, 22, 2010 ) . Zurich Financial Services is one of the largest fiscal establishments in the universe. Its two chief concern countries are general insurance, which accounts for about 75 % of its concern globally and life confidence ( pensions, protection and investings ) , which represents 25 % of its concern. Zurich Life in Ireland trades chiefly with life confidence concern. This is alone within the group in that Ireland is the lone state in the Zurich group where the life concern is larger than the general concern. As at 01 October 2010, Zurich Financial Services has a market capitalization of a‚¬26 billion and is rated AA- by Standard & A ; Poor ‘s ( David Glennon, 23, 2010 ) .
In 2008, it was announced that Dublin would go the European Hub for the groups ‘ life concern. This means that all the operational facets of Zurich ‘s life concern in Europe would be based in Dublin. This has resulted in a important addition in employment of 60 people.
When Zurich Life plc announced their consequences for the first nine months of 2010. Anthony Brennan the CEO of Zurich Life stated
“ our 2010 public presentation continues to be strong across life and pensions concern… … … … ..The strength of our parent company Zurich fiscal services gives our clients peace of head that we are portion of a planetary company with one of the best fiscal strength ratios in the universe ” .
Over the class of the first three quarters of 2010 Zurich Life has seen it ‘ s life market portion addition to 13 % and it ‘ s sum market portion addition to 18 % from 16 % at the terminal of 2009 ( Anthony Brennan, 24, 2010 ) .
SWOT Analysis of Zurich Life Plc
The undermentioned SWOT analysis was set abouting to measure the strengths, failings, chances and menaces confronting Zurich Life Plc.
Increased market portion in 2010 to 18 % .
Zurich Life ‘s image has non been tainted by the Irish banking crisis.
Zurich Life benefits from holding a widespread international presence, this planetary presence ensures that the company trade name is known and respected throughout the universe.
Zurich Life is a good established planetary trade name.
Firms who operate passively managed financess have gained a larger market portion, this market portion grew to 35 % in 2009.A This growing is outlined in figure two.
Zurich Life needs to maintain gait with it ‘ s challengers in relation to the usage of engineering and it ‘s utilizations for new concern coevals.
With many of the Irish Bankss holding to have fiscal aid, Zurich Life can increase market portion by underscoring their strong fiscal place and their ability to return net incomes for their investors.
Zurich Life can farther develop their cross boundary line concern, which has seen a important rise following the gap of the new European hub in Dublin.
With the EU holding an aging population ( CSO, 25, 2010 ) the inducement for people to supply for their retirement is increasing and should supply for an addition in concern for Zurich Life.
A drawn out economic downswing will see a lessening in investings.
While offering a diversified merchandise scope is advantageous, some investors prefer to cover with specialist investors who have a elaborate cognition of niche market countries.
Figure 2: Growth of Passive Investment Funds. Beginning: Morningstar Direct Fund Flows
Industry Summary and Conclusion
The industry is doing a recovery following the 2008 stock market clang which had a annihilating consequence on investing financess worldwide. Under the Irish Government ‘ s Four Year Recovery Plan, revenue enhancement alleviation for pension investing will be reduced from 41 % to 20 % ( Tom Deegan, 26, 2010 ) . This will present new challenges for the industry and this will hold a large impact on in-between income earners who seek to obtain an equal degree of a ego funded pension. Technological progresss will alter the manner companies do concern within the industry, as new on-line systems are rolled out, companies will be in a place to scale down their staffing degrees and offer their clients a faster and more efficient service. This will enable companies to cut down costs. While the life insurance industry and the Irish banking industry are separate entities, new stricter fiscal ordinance will better the image of the Irish fiscal sector as a whole. Traveling frontward, consumer assurance demands to be regained and the image of the Irish banking sector needs to be repaired for the industry to turn.