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IFAs and personal accounts threaten provider profitability, says Moody’s

The strength of the IFA community and the implementation of personal accounts both threaten future provider profitability, according to Moody’s.

The ratings agency has put the UK life insurance sector on negative outlook.

Moody’s has warned that life offices lack control of product distribution due to the strength of the IFA sector.

It says that the high commission required to retain business flows is a contributing factor to the poor performance of many UK life companies.

Moody’s says that personal accounts are likely to have a limited “cannibalisation’” impact, due to the scheme’s focus on lower-earners.

But the research note goes on to say: “We expect that there is still a real risk that, through price contagion, this could add further sustained pressure to the profitability of pensions.”

Other factors affecting Moody’s outlook for the UK life sector include strong but depressed capitalisation, weakening profitability and substantial exposure to equities.

Moody’s says that the industry, although still showing a robust capital position and with the strongest players showing still very strong capital positions, has clearly experienced some deterioration in capitalisation in the last six-12 months.

If the economy does enter a relatively prolonged period of slowdown, with
a depressed equity market, Moody’s believes it is unlikely that capitalisation
levels will improve markedly in the short-to-medium term.


Gartmore makes two managers redundant

Gartmore has confirmed that the roles of fund managers Ashley Willing and Karl Bergqwist have been made redundant. The two will be in consultation with the company about potentially being deployed to other roles.

Agencies slammed over RMBS ratings

Homefunding chief executive Tony Ward has hit out at credit rating agencies for poor assessments in their ratings of residential mortgage-backed securities.

Spread the risk

For many investors, the recent volatility in the markets has been a wake-up call. We all know that equity markets can fall as well as rise but the extended bull market that we have seen in equities since 2001-02 has lulled many investors into a false sense of security.

Iain Chadwick

The Budget 2015: a brief overview

Following George Osborne’s delivery of his sixth Budget as chancellor and the last of this current parliament, we have provided a brief overview of the initiatives put forward in his statement, focusing on the topics that have an impact upon the pensions landscape, savings, personal taxation and businesses.


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