Northstar was established in Bermuda in 2005. Can you tell us a bit about how the company was set up and its history?
The company dates back to 1998, when it was established as Nationwide Financial Services Bermuda.
It was renamed Northstar in 2005 following the acquisition of Metlife’s Bermuda business and operations.
Northstar therefore has a long operating history and a seasoned senior management team, many of whom have been with the business since it started as Nationwide.
Since the establishment of Northstar, the team has managed the integration of a number of blocks of business as well as the launch of a range of products under the Northstar brand.
What products does Northstar offer and what type of client does it target?
Northstar caters to international mass-affluent investors offering both fixed-rate and variable investment products within a Bermuda trust structure.
The investments backing the fixed-rate products are conservatively managed, with 75% of total investments held in a liquid bond portfolio managed by BlackRock.
The variable annuity platform offers investors access to a broad selection of funds from a range of leading asset managers.
Clients tend to be attracted by the conservative nature of the products, as well as the various benefits provided by the Bermuda trust structure.
What are the specific benefits of being based in Bermuda?
Bermuda is widely recognised as the jurisdiction of choice for the global insurance and reinsurance industries, largely because its legislative framework is focused on ensuring that policyholders are always protected.
Northstar is a segregated accounts company, which means that each investment contract issued by Northstar is held in its own segregated account.
This ensures policyholders’ assets are protected and that they are segregated from Northstar’s creditors.
Furthermore, all Northstar products are issued inside a Bermuda trust structure, which offers investors the advantages of a traditional trust structure but at significantly less cost.
Unlike traditional trusts, Northstar investments are also relatively straightforward and quick to establish.
In addition to not being subject to tax in Bermuda, Northstar investors are provided with financial security, privacy and wealth transfer flexibility.
How does Northstar differentiate itself from its competitors?
Northstar’s fixed-rate products offer very competitive guaranteed rates and a range of additional features, including generous liquidity privileges and a variety of commitment periods.
On the variable side, Northstar offers a wide and constantly evolving choice of funds.
We have also recently added a series of lower-cost investment options from selected assets managers, including Vanguard and BlackRock.
You offer funds through your platform from 17 well-known asset managers. Please describe the selection process for adding new funds and the rationale behind the current selection.
We tend to favour large institutional asset managers, but we spend a lot of time analysing which of their funds should be included on the platform.
The list of approved funds is then closely monitored on an ongoing basis using both quantitative and qualitative metrics.
The list is not static and we add or remove funds as necessary in order to ensure we are always able to provide our clients with a robust and attractive choice of funds.
Some investors, particularly those who live further away from Bermuda, may worry it is not as tightly regulated as jurisdictions more commonly used by international life companies such as the Isle of Man or Dublin. Are these concerns justified in any way?
Bermuda has earned a formidable reputation as a leading financial centre, with a strong and stable economy and extensive resources of intellectual capital in key sectors, including insurance, financial and legal services.
The island has a long history of providing sophisticated financial and professional services to international business as well as high-net-worth individuals.
Bermuda is acknowledged as a key participant in the global insurance and reinsurance markets with an Aa3 rating from Moody’s.
The financial strength of the market, key developments in innovative risk financing and strong yet practical regulation have made Bermuda the jurisdiction of choice for many of the world’s leading insurance companies.
The Bermuda Monetary Authority (BMA) is the integrated regulator of the financial services sector in Bermuda and it supervises, regulates and inspects financial institutions operating in or from within the jurisdiction.
The BMA develops risk-based financial regulations that it applies to the supervision of Bermuda’s banks, trust companies, investment businesses and insurance companies.
In addition, the BMA provides specific reports on its activities to the minister of finance on an annual basis.
In carrying out its role, the BMA both follows and helps to set international best practice.
In which countries and regions do you currently market your products? Are any of these particularly fruitful?
Northstar distributes its products through a range of regulated banks and broker dealers that are predominantly based in the US, but with international clients.
The firm’s products have been sold all over the world with the majority of sales split roughly between Asia, South America and Africa and with further sales in Canada, the Caribbean as well as some parts of Europe.
Are you planning to target any new countries or regions in this coming year?
Northstar is aiming to increase sales across all territories over the coming year and so we are keen to talk to potential new distribution partners in all regions.
A near-term priority is to identify suitable intermediaries that can represent the firm to financial advisers in the Middle East, as the firm currently has limited coverage there.
We are also keen to talk to potential new intermediaries in Asia as there appears to be a strong appetite for our products among Asian investors.
There have been some economic warning signs again recently, with Japan having slipped back into recession, weaker data from China than expected (slightly counterbalanced by the subsequent cut in rates) and concerns over the sustainability of the eurozone recovery. Are any of these economic headwinds of concern to Northstar? If so, are you doing anything to counter them?
Despite recent improvements in the US economy, the world continues to experience a growth challenge.
The abundant liquidity support provided by central banks in recent years has supported the financial system but many countries have failed to implement the structural reforms required to reduce debt and stimulate growth.
This is particularly true in Europe.
The astonishing performance of asset prices, particularly equities, is a direct result of this monetary stimulus but this stimulus has not generated the economic activity that the central banks had hoped for and so deflationary pressures are building.
The implication is that we are likely to remain stuck in a low rate environment for some time as central banks continue to provide liquidity support in order to avoid negative growth.
This is a widespread concern and Northstar is focused on ensuring its products are well-positioned for this environment and any volatility.
Our fixed-rate products offer an attractive alternative to bank custodian deposits in this market, with generous liquidity features. Investors who feel the low rate environment will continue can enhance their rates by waiving the return of principal features we offer on some of our fixed rate products.
The selection of funds on our variable product platform covers a wide range of asset classes, offering clients the opportunity for thorough portfolio diversification and the flexibility to move quickly in and out of different asset classes.
We are planning to launch principal protected products linked to baskets of funds in the New Year and we believe this should provide clients with further comfort in the event of a reversal in asset prices.
What are your priorities for the coming year?
We are committed to continuing to grow the business steadily while constantly improving our product offerings and enhancing our client service.
A key focus for next year is to introduce several new products to meet the specific requests of our investors.
In Q1 2015, we will be launching a new variable product backed by low cost funds with greater liquidity and flexibility.
We are also broadening our fixed-rate offerings to include a range of new maturities and we hope to launch that in Q1 as well.
We are close to finalising the terms and features of a new optional death benefit rider that we are aiming to offer on all products. Finally, we intend to further improve our variable fund offering by making new analytical tools available to both investors and their advisers on our website
