Aging Societies And Retirement: A Ticking Time BombA Ticking Time Bomb "Reinventing Retirement Asia:...
Transcript of Aging Societies And Retirement: A Ticking Time BombA Ticking Time Bomb "Reinventing Retirement Asia:...
The Hartford Financial Services Group, Inc.
Gregory A. BoykoPresident & CEOHartford Life Insurance K.K.March 16, 2007
Aging Societies And Retirement:A Ticking Time Bomb
"Reinventing Retirement Asia:Enhancing the Opportunities of Aging”
AARP Conference, Tokyo, Japan
Workshop 6: “The Gold Power of the 50 Plus Market”
The Hartford Financial Services Group, Inc. 2
Aging Societies And Retirement:Agenda
Global demographic trendsDeclining workforcesStrain on government and corporate pensionsPublic concern about retirementShifting retirement burden to individualsNeed for retirement education and credible financial advice
The Hartford Financial Services Group, Inc. 3
The Hartford Financial Services Group is an Insuranceand Financial Services Industry Leader
Honoring promises since 1810
Over 30,000 employees worldwide, over 650 in Japan
Strong insurer financial strength ratings
A.M. Best A+
Fitch AA
Leading provider of: mutual funds; annuities; life insurance and group benefits;
automobile and homeowners products; business property-casualty insurance
Growing international operations in Japan, United Kingdom and Brazil
Hartford Life Insurance K.K. is the #1 provider of variable annuities in Japan
Over 450,000 policyholders in Japan
Standard and Poor’s AA-
Moody’s Aa3
Aging Societies And Retirement:The Hartford Has Honored Its Promises Since 1810
The Hartford Financial Services Group, Inc. 4
10%16%
26%
17%
25%31%
21%28%
34%
26%
37%
48%
0%
10%
20%
30%
40%
50%
60%
World U.S. U.K. Japan
Percent of Population over 60
2005 2025 2050
64.7
74.777.3
82.478.3
83.5 81.9
88.3
60
65
70
75
80
85
90
95
World U.S. U.K. Japan
Life Expectancies
2005 2050
People in developed countries are living longer and populations are aging. This is putting a strain on public and corporate pension plans.
Source : United Nations Population Division: World Population Prospects: The 2004 Revision
Aging Societies And Retirement:Increasing Life Expectancies
The Hartford Financial Services Group, Inc. 5
Aging Societies And Retirement:Declining Workforces Will Strain Pensions
Worker-to-Retiree Ratios*
0.00.51.01.52.02.53.03.54.0
2000 2010 2020 2030 2040
U.S. U.K. Japan
Aging populations make it difficult for pension systems to provide funds for a significantly older, non-working population.
* Ratio of Workers (aged 15-59) to Retirees (60 and over)Source: Watson Wyatt Aging Vulnerability Index, 2003
The Hartford Financial Services Group, Inc. 6
Aging Societies And Retirement:Fear of Insufficient Funds in Retirement
24%11% 10%
35%
20% 18%
33%
42%39%
Somewhat concernedVery ConcernedExtremely Concerned
Japan U.S. U.K.
73%67%
Source: Hartford Life Insurance Retirement Survey, September 2006Base: People aged 45 and older in Japan (1,040) the US (757), and the UK (756).
The majority of people are concerned about having enough money to maintain their standard of living in retirement, particularly in Japan.
91%
The Hartford Financial Services Group, Inc. 7
Aging Societies And Retirement:Important Retirement Income Sources
32%
9%
23%24%
46%
57%65%
68%
43%45%
72%
31%
16%
39%
21% 25%
41%
52%
35%43%
64%
Public Pension Bank or PostalDeposits /
Investments
Work Part orFull Time
DefinedBenefit
EmployerPension
Home / RealEstate
Life Insurance Defined Cont.EmployerPension
Japan U.S. U.K.
Public pensions are still considered the most important source of retirement income….
Source: Hartford Life Insurance Retirement Survey, September 2006Q: Please rank the top three of the following sources of retirement income, in terms of each one’s importance to you.
(% selecting “first”, “second”, or “third” most important)
The Hartford Financial Services Group, Inc. 8
47%
21%
42%
42%
30%
36%
Not too confident
Not at all confident
Japan U.S. U.K.
89%
78%
51%
Yet the majority of people in Japan, the U.S. and the U.K. lack confidence that public pension income will be sufficient.
Aging Societies And Retirement:Confidence in Public Pensions is Low
Source: Hartford Life Insurance Retirement Survey, September 2006Q: How confident are you that your government-sponsored pension plan will provide you with sufficient income to maintain
your current standard of living? Base: Total Respondents
The Hartford Financial Services Group, Inc. 9
14%
21%
22%
42%
51%
65%
67%
176%
0% 25% 50% 75% 100% 125% 150% 175% 200%
Australia
South Korea
China
United Kingdom
Switzerland
United States
Germany
Japan
Public Debt as a Percentage of GDP
Source: CIA World Factbook estimates
Rising Japanese Public Debt
The rise of government debt levels to 176% of GDP has contributed to widespread concern about the public pension system.
Aging Societies And Retirement:Rising Public Debt in Japan
$0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 $7.0
1
2
3
4
5
6
72006*
2004
2005
2002
2003
2001
2000
$6.9
$6.7
$6.2
$5.5
$5.3
$4.8
$4.3
(US$ Trillions)
Source: Ministry of Finance, Government of Japan* As of November 30, 2006
The Hartford Financial Services Group, Inc. 10
Aging Societies And Retirement:Responses in Japan - Higher Individual Burden
Government• Retirement age raised to 65• National health care co-payments raised to 30%• Consumption tax raised to 5%• Mandatory long-term care insurance launched
Corporate• Shift to defined contribution plans• Less reliance on defined benefit pensions
The government and corporations have largely responded by reducing benefits, resulting in increased individual burden.
The Hartford Financial Services Group, Inc. 11
Aging Societies And Retirement:Shifting Balance to Individual Responsibility
GovernmentPensions
Working inRetirement
Individual Savings& Investment
CorporatePensions
RetirementIncome
The burden for retirement income is shifting to individuals.
The Hartford Financial Services Group, Inc. 12
Aging Societies And Retirement:Solutions for Individuals are Varied
Working in Retirement• Delay retirement, work longer• Flexible work arrangements (telecommuting)
Individual Savings & Investment• Investment trusts, variable & fixed annuities• Supplementary health insurance products• Retirement education & investment advice
Solutions increasingly depend on individual efforts.
The Hartford Financial Services Group, Inc. 13
5.217.4
36.5
70.4
110.4
0
20
40
60
80
100
120
2002 2003 2004 2005 2006
313 322 357478
600
0100200300400500600700
2002 2003 2004 2005 2006
Investment Trust Assets Variable Annuity Assets(US$ Billions*) (US$ Billions*)
Sources: Investment Trust Association of Japan, data as of December 31 annuallyHoken Mainichi (Daily Insurance) Newspaper, data as of September 30 annually
Aging Societies And Retirement:Retail Investment Product Demand in Japan
Strong demand for investment trusts with regular payments.Strong demand for variable annuities with guarantees.
*Converted from Yen at $1.00 = ¥115
The Hartford Financial Services Group, Inc. 14
Japanese have over $12 trillion in personal financial assets - 51% in cash and deposits.
Source: Bank of Japan, The Central Council for Financial Services Information, “US-Japan Flow of Money Comparison, 2006 3rd Quarter”
Aging Societies And Retirement:Personal Financial Assets - Idle Cash in Japan
Japan USOther: 4.6% Other: 3.4%
Cash & deposits:51.3%
Cash & deposits:13.3%
Bonds:7.1%
Bonds: 2.8%
Stocks:10.7%
Stocks: 30.8%
Mutual Funds:14.0%
Mutual Funds: 4.0%
Insurance &Annuities: 26.6%
Insurance &Annuities: 31.4%
The Hartford Financial Services Group, Inc. 15
Aging Societies And Retirement:Retirement Planning and Investing in Japan
Source: Hartford Life Insurance Retirement Survey, September 2006Q: How confident are you in your knowledge and abilities with financial planning? Q: Which of the following phrases best describes your approach towards risk and rewards when you choose investments?
8% 10%21%
53%
22%24%
Not Too ConfidentNot at All Confident
Confidence in Financial Planning
Japan U.S. U.K.
30% 34%
74%
18%11% 13%
35%31%
54%
Fairly Risk Averse/ Accept SmallGain
Completely Risk Averse/AcceptMinimal Gain
Tolerance for Risk
42%48%
72%
Japan U.S. U.K.
Japanese are less confident and more risk averse.
The Hartford Financial Services Group, Inc. 16
Source: Hartford Life Insurance Retirement Survey, September 2006Q: What or who do you rely on for credible financial planning advice? Base:Total Respondents
35%
24%16% 15%
11%7%
38%
17% 18% 19%
7%
40%
18%
26%33%
23%
46%
26%
2%
13%
4%
News Media PersonalContact
Fin. Plnr. / TaxAcct.
Bank Rep SecuritiesFirm
Ins. Agent Don't KnowWhere to Turn
Japan US UK
Japanese are far more unsure of where to turn for credible financial planning advice.
Aging Societies And Retirement:Sources of Credible Financial Advice in Japan
The Hartford Financial Services Group, Inc. 17
Aging Societies And Retirement:Financial Assets Held By Older Generations
Nearly 80% of Japan’s 13.1 trillion dollars* in personal financial assets are held by individuals aged 50 and over.
20-291%
30-396%
40-4915%
50-5928% 60-69
35%
70 and over15%
Source: Bank of Japan, The Central Council for Financial Services Information, 2005
Japanese Financial Asset Distribution by Age Group
*Converted from Yen at $1.00 = ¥115
The Hartford Financial Services Group, Inc. 18
Variable annuities are a great product to meet Japaneseretirement planning needs.
Guarantees protect principalOption for guaranteed lifelong incomeTax deferral and estate planning benefitsAbility to switch fundsDiversified funds allow stable growth
Aging Societies And Retirement:Variable Annuities Suited to Older Generations
The Hartford Financial Services Group, Inc. 19
The Hartford's Variable Annuity Assets UnderManagement in Japan (US$ Billions)
0.5 1.02.3
4.8
8.1
11.1
16.5
21.9
26.728.3
0
5
10
15
20
25
30
Mar.2002
Sep.2002
Mar.2003
Sep.2003
Mar.2004
Sep.2004
Mar.2005
Sep.2005
Mar.2006
Sep.2006
Dec.2006
29.7
Aging Societies And Retirement:The Hartford’s Variable Annuity Growth in Japan
The Hartford Financial Services Group, Inc. 20
Hartford Life Insurance promotes financial education through:
Publications about annuities and investing
Educating the media and other stakeholders
Public opinion surveys about retirement
Seminars for customers and the public
Aging Societies And Retirement:The Hartford is Committed to Financial Education
The Hartford Financial Services Group, Inc. 21
Increasing pressure on public and employer safety nets
Retirement responsibility shifting to individuals
Individuals concerned, but not sure what to do
Need for financial education and investment advice
The Hartford’s variable annuities are helping customers prepare for retirement
Aging Societies And Retirement:Summary: Defusing The Time Bomb