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DTCC cuts fees for insurance services

21 May 2007  |  1929 views  |  0 Source: Depository Trust & Clearing Corporation

The Depository Trust & Clearing Corporation's (DTCC) Insurance Services business announced today the first fee reduction in its history, reflecting growing usage of its services.

Insurance Services has automated linkages and data exchange between carriers and their broker/dealer, bank and other distributor partners who market insurance products.

"Working in collaboration with the insurance industry, we have been able to bring the benefits of cost efficiency back to our clients. With volumes rising, we expect to further drive down costs and pass those savings along to our customers in the form of future fee reductions," said John Ziambras, managing director and general manager, Insurance Services. He added that the fee reduction is part of DTCC's at-cost business model, which requires a continual reassessment and "right-sizing" of fees to ensure full cost recovery and to then return excess revenues to customers as volumes grow.

The fee reduction affects Positions & Valuations, Insurance Services' most heavily used service, and it is effective July 1, 2007. The fee reduction follows Insurance Services' record year of performance supporting the annuity and life insurance market, with volume for this service alone reaching 2.7 billion transactions in 2006, an 18% increase over 2005 and a 50% increase over 2004. DTCC expects the fee reduction to save the insurance industry in excess of $2 million during the first 12 months.

Positions & Valuations automates and standardizes the transmission of annuity and life insurance contract details from carriers to distributors, providing them with information on all assets under their management, including key contract data, current values, service features and parties to a contract. It is also used as a tool by the industry to comply with regulatory requirements, such as anti-money laundering and "Know Your Customer" statutes.

Customers Respond
Jonnie Smith, senior vice president of Annuity Operations & Administration, John Hancock Financial Services said, "John Hancock's annuities and life insurance businesses have increased dramatically in recent years. Therefore, reducing the fees for Posinfees for Posin reducing the fees for Posiny in recent years. Therefore, reducing the fees for Posinnuities and life insurance businesses have increased dramatically in recent years. Therefore, reducing the fees for Positions and Valuations allows our firm to take advantage of the scale we enjoy today. When the industry set out to automate annuity and insurance processing, DTCC committed to lowering overall costs through their centralized technology infrastructure. They are delivering on that commitment, and we are very pleased with their decision." John Hancock is the U.S. Division of Manulife Financial Corporation.

"Ten years ago the industry engaged DTCC to mainstream insurance processing due to its history of containing and reducing costs over time; this fee reduction affirms we made the right decision," commented Esther Stearns, president and chief operating officer, LPL Financial Services. "LPL continues to expand its utilization of Positions and Valuations, and this substantiates our commitment to automate the transfer of post-trade information to advance industry efficiency."

Fee Reductions Based on Usage
The fees for Positions & Valuations are based on levels of usage and calculated for every 1,000 transactions:
  • For 4 million and over, the new fee will be $2.00 vs. $3.50, a 43 % decrease.
  • For 2 million to 4 million, the new fee will be $3.00, vs $3.75, a 20% decrease.
  • For 500,000 to 2 million, the new fee will be $4.00, vs. $4.50, an 11% decrease.
  • Transactions under 500,000 remain at $8.00.

    Background Information
    Insurance Services are provided by DTCC's National Securities Clearance & Settlement subsidiary. In addition to Positions & Valuations, they include:
  • Financial Activity Reporting: allows distributors to receive transaction details, such as disbursements, rebalances and asset allocation changes, and helps companies comply with anti-money laundering and other regulatory provisions.
  • Applications & Subsequent Premiums: transmits from distributors to carriers annuity applications with initial premiums, as well as subsequent premiums; the service also provides same-day money settlement.
  • Commissions: delivers information from carriers to distributors on commission and compensation payments and provides same-day money settlement.
  • Asset Pricing: transmits from carriers to distributors the unit values for the underlyingfunds in variable annuity and life insurance products on a daily basis.
  • Licensing & Appointments - automates the two-way flow of information between insurance carriers and distributors to process licenses and appointments.
  • ACATS/IPS - facilitates the transfer of annuity assets between distributors.
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