KClients with a life insurance contract with a classic Zurich interest rate guarantee will be looked after by a new owner in the future. The old stock of 720,000 contracts will become the property of the Viridium Group in Neu-Isenburg in Hesse. After the Generali portfolio, which Vidium acquired in 2019, this is the second largest transaction by the processing specialist.
The company undertakes to the insured to continue the contracts with all existing obligations. The assets under management are 21 billion euros. The liquidator can operate more efficiently by purchasing large inventories, thereby realizing cost advantages and optimizing the capital investment. The financial regulator Bafin still has to approve the transaction. Unlike some politicians, however, she has never fundamentally questioned the settlement platform model.
In a statement on Friday, Viridium emphasizes that the portfolio transfer three years ago was not to the detriment of Generali customers. Current interest has continued to be credited to the accounts. In this specific case, the rate of contract terminations has even decreased. Before the transaction it was 3.1 percent, since then it has fallen to 2.6 percent.
Fifth inventory purchase by Viridium
“Policyholders can rest assured that we are fully focused on fulfilling their contracts over the long term and that they will benefit from the financial and operational advantages of our business model in the process,” said Tilo Dresig, CEO of the Viridium Group, in the statement .
With the fifth purchase of a portfolio, a logical next step in the development of the group, which, unlike its competitor Frankfurter Leben, has specialized in policies with guaranteed interest, is taking place. This acquisition underscores “that Viridium, with its specialized portfolio management model geared towards sustainable customer benefits, is firmly established as a reliable partner in the life insurance industry,” he commented.
The model is based on the fact that cost gains (at least 50 percent) and revenue increases (90 percent or more) end up with the customer in accordance with the minimum allocation regulation. The platform can attribute the rest to itself. According to its own statements, Viridium has increased the allocated surpluses by 71 percent on a three-year average in the case of Generali since the takeover. Critics see the long-term behavior of investors as an uncertainty factor. Behind the Viridium Group are two industry representatives, Hannover Re and Generali, and a British investment group, Cinven.
Insurers’ association is behind the buy-out model
The Association of German Insurers GDV, on the other hand, sees no disadvantages in the model: “A portfolio sale – which is strictly monitored by the Bafin – can have advantages for everyone involved,” said Managing Director Jörg Asmussen on the occasion of the most recent portfolio transfer.
If smaller stocks were merged into one large stock, the platform could use synergies. And the advantages also outweigh the advantages for the sellers: “Selling companies will have more leeway for their future presence on the market.” Insurers would have to meet their obligations in any case, customers could benefit from the synergies.
Much earlier than other German life insurers, Zurich had parted with products with traditional guarantees. Through the Swiss parent company, it took part in the Swiss Solvency Test a few years before more market-oriented supervisory rules were introduced in the European Union, and as a result became aware of the growing risks of guarantees in the low-interest phase. They adjusted their new business to this and gave the old portfolios in a so-called run-off.