BusinessDay 25 Oct 2017

Wednesday 25 October 2017
C002D5556
BUSINESS DAY
A7
Read Ambitiously
Global markets pause ahead of
earnings, Central bank moves
Insurers unload
problems into
private equity’s arms
PAUL J. DAVIES
The world of ultralow interest
rates is a waking nightmare
for life insurers and pension
companies, especially those
which guaranteed high returns
to customers. One option is to
get someone else to manage the
problem.
A couple of large sales in Europe
could test the market and unlock
value for investors. Ergo, a division
of Munich Re , MURGY -1.36%
and Italy’s Generali are exploring
options for books of old German
policies, which have combined assets
of €100 billion ($117.5 billion).
Similar consolidation has already
happened in the U.K. and more
recently the U.S., where Apollo
Global Management APO 0.37%
built Athene Holding ATH 0.43%
through a string of deals and then
raised $1 billion listing it in New
York last year.
Insurers’ troubles are tied to
long-term investment products
and annuities that guaranteed
high returns or lifetime incomes,
which were easier to fulfill before
the financial crisis and era of
quantitative easing.
Selling these old policies on
is sensitive with regulators and
customers, provoking fears that
payouts may be disrupted. New
owners, often private equitybacked
vehicles, might make riskier
investments to get more profit
after meeting liabilities, which
can last for 20 years or more. That
said, specialist consolidators can
be better managers of old policies,
rather than a less interested insurance
group that wants to sell new
policies and sees the old business
as a burden.
New owners can make the
business work better by investing
specifically for higher-cost legacy
policies and centralizing asset
and capital management for several
books of business. They can
also find savings in reinsurance,
tax and administration costs by
bringing these things together in
cheaper locations, such as Ireland.
A huge volume of such assets
sit in Germany, which was long
seen as resistant to sales. That
is changing. Regulators have
approved several smaller deals
by three private-equity backed
groups, which would be the most
likely bidders for Ergo’s and Generali’s
German business.
Apollo’s Athene has done a
couple of deals in Europe through
a sister company, Athora, which
has privately raised more than €2
billion from long-term investors.
GEORGI KANTCHEV
Global stock markets
mostly edged higher
Tuesday as investors
took positions ahead
of several earnings reports
and key central bank moves.
Futures pointed to a 0.1% opening
gain for the S&P 500, following a loss
Monday after disappointing earnings.
The Stoxx Europe 600 index
was down 0.1% after lower-thanexpected
economic numbers,
while bourses across Asia finished
mostly higher.
Investors were focused on the
next batch of profit reports, with
nearly 200 companies in the S&P
500 on the week’s earnings calendar,
according to FactSet. Strong
results in previous quarters, as well
as solid economic growth around
the world, have underpinned
stock markets and pushed them
University of Wisconsin Business School
to vote on halting M.B.A. admissions
KELSEY GEE
Officials at the Wisconsin
School of Business
have proposed suspending
admissions
to its full-time master’s in business
administration program for
a year.
At a time when students want
shorter, more targeted degrees,
the school at the University of
Wisconsin-Madison may become
the latest to discontinue
its flagship M.B.A. program. The
University of Iowa’s Tippie College
of Business and Wake Forest
University’s business school have
also ended their full-time M.B.A.
programs recently, citing flagging
student demand.
The proposal has touched a
nerve with students and alumni,
who say a vote to halt M.B.A.
admissions at Wisconsin, one of
country’s oldest business schools,
could effectively end the program.
Hundreds of the business
school’s students and staff assembled
Monday for a town- hall
meeting with Dean Anne Massey,
attendees said. Originally sched-
to record highs.
“It’s a busy week for markets but
risk assets continue to perform,”
said Richard Benson, co-head
of portfolio investments at $18
billion fund Millennium Global
Investments.
Central banks are another focus
for investors this week. The
uled for 45 minutes, the meeting
stretched to nearly two hours as
students questioned the dean
about potentially cutting the
program.
Faculty are scheduled to vote
on whether to halt M.B.A. admissions
in early November as part
of a wider review of the school’s
programs, which will evaluate
whether or not the school should
shutter the full-time degree for
good, while expanding on other
more flexible and shorter programs.
The vote would go into
effect immediately, eliminating
the two-year M.B.A. class of 2020.
In a posting on its website
Monday, the school said its
portfolio review was prompted
by competing demands for resources
and “a changing market
for graduate business education.”
Some 104 students enrolled
in Wisconsin’s M.B.A. program
this fall, down 11% from 2010,
according to a school spokesman.
Though elite programs at Harvard
University and Stanford University
continue to attract applicants,
some schools outside the top tier
are finding it harder to maintain
interest in the two-year M.B.A.
European Central Bank is set to
announce changes to its massive
bond-buying program after its
meeting Thursday. Economists expect
the ECB to reduce its monthly
asset purchases, possibly by half,
but also to extend the program for
a number of months into 2018.
Investors “need to exercise
LAURA MECKLER & SHANE HARRIS
caution as markets enter a different
phase with less central bank
support than has been the case
over the past decade,” said David
Simner, portfolio manager at Fidelity
International.
On Tuesday, IHS Markit said its
composite Purchasing Managers
Index for the eurozone—based on
survey responses from manufacturers
and service providers—fell
to 55.9 in October from 56.7 in
September. The index still points to
solid growth, with 50 demarcating
a rise from a contraction in output.
Also of interest to markets,
U.S. President Donald Trump is
expected to unveil his pick for the
new leader of the Federal Reserve
within the next 10 days from a
roster of candidates that include
current Fed Chairwoman Janet
Yellen. Late Monday, Mr. Trump
said he was “very, very close” to
naming his choice.
U.S. to allow refugees from all
countries but with new rules
The Trump administration
will allow refugee
admissions to the U.S. to
resume for all countries
but with new rules meant to better
vet applicants, administration
officials and others familiar
with the planning said.
The White House plans to
announce the resumption of admissions
and at least some of the
new rules on Tuesday, officials
said. Refugee admissions had
generally been halted in June,
with some exceptions.
Under the new rules, the administration
will collect more biographical
data, such as names
of family members and places
of employment, officials said.
The administration will also do
more to mine social media posts
to see, for instance, if refugees’
public pronouncements are
consistent with the stories they
offer in their applications, the
officials said.
In addition, officials who
do the screening at the U.S.
Citizenship and Immigration
Services agency, which is part
of the Department of Homeland
Security, will be given new guidance
and better training aimed
at detecting fraud on the part of
applicants, one person said.
The refugee program was
put on hold in June for 120 days
as part of the larger travel ban
ordered by President Donald
Trump designed to thwart potential
terrorists. That period
expires on Tuesday.
Under the new order being
issued, refugee admissions will
resume for all countries. However,
one person familiar with
the planning said that people
from 11 targeted countries will
be subject to additional vetting
that will slow down the process
for them.
The vetting process can be
particularly challenging because
applicants have been forced to
flee their home countries and
often don’t have documents
that are helpful in confirming
identity and other details
typically used in screening. In
addition, their home countries
are often unwilling or unable to
cooperate.
Advocates for refugees have
long pointed to the lengthy
process that applicants undergo
already and say that the existing
vetting process is more than
adequate.
“The United States’ refugee
vetting procedures—which include
extensive and comprehensive
interviews as well as
multiple rounds of security
vetting with an array of U.S. and
international intelligence and
law enforcement agencies—are
widely recognized as the most
stringent in the world,” said a
statement last month from the
advocacy group Human Rights
First. The group cited support
for the program from national
security officials in both political
parties.