Transamerica returns to profitability in 2009

par Donna Glasgow | June 26 2000 01:42PM

Transamerica Life Canada finished the 2009 fiscal year with an $87 million profit, significantly better than the $583 million loss posted the year before. 

Doug Brooks, President and CEO of the company says the vast majority of this improvement in earnings can be attributed to stronger equity market performance. "In addition, business profitability was improved through changes to products and disciplined pricing, and experience was also generally good. The company also managed expenses very effectively."

Revenues doubled

The company's revenues were also up at $862 million in 2009, doubling the $430 million recorded in 2008. "The primary driver of increased revenue was improved investment income, which was up dramatically compared to 2008," says Mr. Brooks. "This was a result of both improved equity markets and improved credit markets, As credit spreads narrowed, the value of the company's investments increased. The company's bond portfolio is of very high quality, and as a result, credit losses were very small. More than 99% of the company's bond portfolio is rated as investment grade."

In Transamerica Life Canada's 2009 annual report, it states that sales decreased 21% for life insurance products and increased 19% for segregated funds.

Mr. Brooks explained that "the dip in life sales in 2009 reflects a period during which we withdrew certain unprofitable products. Segregated fund sales increased partly due to the retention of maturing policies."

Among its priorities in 2010, Mr. Brooks says Transamerica will continue to focus on effectively managing its capital and ensuring solid profitability of its products.

With respect to risk management, he commented that the AEGON companies have a robust risk management framework within which Transamerica participates. Hedging equity risk associated with its segregated funds is part of its efforts. "Under current risk management measures, we hedge the equity risk associated with the entire segregated fund portfolio, both new business and in-force business," says Mr. Brooks.

Strategic plan

An important part of the company's strategic plan for 2010 and in the next few years will see it pursue various initiatives aimed at increasing efficiency for advisors, adds Mr. Brooks. "These include the implementation of electronic applications and an electronic underwriting process, as well as a simplified investment product platform."

Back in 2007, Transamerica "identified an issue related to excess management fees that may have been charged to segregated funds offered under a number of insurance contracts issued by the company in previous years," explains the company's 2009 annual report. It notes that during 2009 "certain affected policyholders" who were part of a class action suit related to this matter were reimbursed. Total settlements paid to policyholders and general expense payments amounted to about $55 million. A provision for future payments was increased by a further $29.6 million.

At year-end 2009, the company's best estimate of the total amount it will reimburse policyholders was $81 million. "The company is in the process of reimbursing the remaining policyholders affected and expects to complete this process in 2010."