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Put investment horse before product cart, says Cazalet

The future is bright for the life insurance sector if it sorts out its business model, says analyst Ned Cazalet.

Speaking at a Cazalet Consulting conference on asset allocation last week, Cazalet said life offices should focus on true profitability rather than new business and put the “investment horse before the product cart”.

He highlighted the problems resulting from churning, the negative impact on the with-profits sector caused by the collapse in equity markets and lower yields as a result of a “chaotic” shift away from equities to bonds.

Cazalet said low inflation is dragging down future equity returns and bond yields while increasing liabilities. Falling gilt yields in particular are bad news for defined-benefit pensions, he said.

But Cazalet said there are huge opportunities for firms which adapt their business model. He said net UK household wealth has rocketed from 3trn in 1991 to almost 6trn in 2004, using 2004 prices. He highlighted the ageing baby-boomer population and new decumulation markets as well as vast opportunities in the DB buyout sector.

Cazalet said providers need to launch “punchier portfo- lios” such as the Skandia best ideas funds.

He argued that the future lies with fee-based wrap platforms and open-architecture fund supermarkets.

Cazalet said: “Wraps and fund platforms will kill off the product and will lead to improved persistency. There are great market opportunities but not with the current business model.”

Cazalet conference, p9

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In Focus — May 2015: private medical insurance market in Germany

Welcome to the latest edition of In Focus. In this issue, Jelf examines the private medical insurance market for employers with expatriate workforces in Germany. This includes the common challenges faced in sourcing appropriate coverage, along with a selection of available solutions. This will be of particular interest to HR/reward decision makers with employees based in Germany. It will assess the cultural norms, risks and backdrop that are relevant to organisations with expatriate staff in this location.

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