Allianz Freezes Sales of Variable Annuities in Japan

Allianz Life Insurance Japan Ltd., a subsidiary of Allianz S.E. [86363], halted the sales of variable annuities in Japan as costs to cover guarantees for the products becames too high amid the plunge in global capital markets.

The Japanese life insurance unit of Allianz launched its first variable annuity product, Allianz NK Kraft, in April last year through a distribution deal with Nikko Securities. The global financial crisis has raised costs for insurance companies selling variable annuities, mutual funds-linked plans that typically guarantees payouts to policyholders.

The hold on selling annuity products is a "natural response to the developments in financial markets that all suppliers face," said Christoph John, head of corporate communications at Allianz Asia Pacific. Overall, risk management costs rose due to changing market conditions.

The pause is a temporary response to the current market environment. Allianz will resume marketing this annuity product in Japan once market conditions improve, said John.

In fact, Allianz is preparing to launch its second variable product in Japan in a bid to tap into the market's need for private annuities. The German insurer sees Japan as an important market to generate profit and to fuel the group's "sustainable growth," said John.

In the first half of the 2008 fiscal year which ends Sept. 30, Allianz Life Insurance Japan earned 41 billion yen (US$464.8 million) in premium income and sold about 5,400 new annuity policies. The life insurer's solvency margin stood at 9,844.1% by September 2008 and total assets were 42 billion yen, according to its financial statement.

In Japan, Allianz also operates a wholly-owned nonlife subsidiary, Allianz Fire & Marine Insurance Japan Ltd., offering individual insurance and corporate commercial lines such as property, engineering, liability, marine and warranty insurance since 1990.

(By Iris Lai, Hong Kong bureau manager: [email protected])