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Who can pick Pearl?

As tremors shake the life insurance industry, Australian life office AMP is searching for a buyer for its Pearl salesforce but there seem to be few takers.

Like other insurance companies, AMP has been badly hit by tumbling stockmarkets. Chief executive Paul Batchelor resigned after the group&#39s share price plunged, wiping A$2.2bn (£768,980) off the company&#39s value.

His quick exit followed the recent admission that AMP&#39s Pearl Assurance did not meet the UK&#39s regulatory capital requirements.

AMP&#39s UK life office will now be split into two divisions, one for ongoing business and one for closed-book business, with the UK life services business run by Ian Laughlin.

The 1,000-strong Pearl team would enable AMP to raise some much needed cash by sidestepping any redundancy or bonus payments. But some industry insiders are dubious over whether it will be able to sell the sales team at all and say there are only a few other insurers who would even be in the right league.

One industry insider says: “It is a pretty large salesforce and only a certain number of people would be able to absorb that number of advisers. CIS is a possible fit, as it has a similar B, C1, C2 customer profile but no one is buying into the insurance market. It is all too much of a risk.”

Manchester-based insurer CIS is currently undergoing a complicated merger with Co-operative Bank. The firm is likely to keep existing agents rather than taking on new ones and is moving towards more phone sales of home and motor insurance with less concentration on using a direct salesforce. There are plans to do more direct business with non-life products in the future, indicating a shift away from the life market entirely.

Another possible contender would have been Liverpool Victoria, say industry commentators but the firm says it has no plans to expand its direct sales force of 30 telephone and 80 on-the-road tied agents.

As to the possibility of an IFA buyer for the Pearl team of 1,000, industry insiders believe there are only a few players in a strong enough position. Both the Misys and Tenet IFA networks are hotly tipped to put in a bid.

Although he would not comment on the sale of Pearl, Tenet group chief executive Simon Hudson says: “We are always interested in any opportunity to talk to providers such as Pearl.”

Tenet represents more than 1,800 RIs and comprises four groups: the M&E network, Interdependence, Independent Mortgage Adviser and IFA Professional Services.

Falcon Group chief executive Allan Rosengren says Tenet is a possible buyer because of its size and its good spread of advisers across the UK. Rosengren says: “Most groups would have an attack of indigestion trying to absorb that number of staff but I think the bigger networks could successfully split the skills of the staff between different areas of the business – aligning the right type of sales adviser to the right type of selling.”

He says another alternative would be to break the salesforce into separate parts and sell these to IFAs according to their specialist areas.

AMP&#39s decision to sell off the Pearl team is an indication of sweeping changes in insurance distribution and challenges the whole concept of lower-tier advice. The Prudential deal with Abbey Nat-ional has set up the bank as its new with-profits provider and indicates that banks will increasingly be in competition with IFAs.

Ned Cazalet&#39s Life 2002 report illustrates the chasm that has opened up between the handful of niche life companies that are thriving and many of the international insurers that are running on dwindling free asset ratios.

Teachers Assurance gained the top spot of the Cazalet chart, outdoing giants such as Norwich Union, Scottish Widows and Standard Life.

Teachers general manager John Hughes says: “Cazalet&#39s rating has put us in the premier league of the insurance industry.”

The niche market providers such as Ecclesiastical Insurance and Teachers Assurance both say they are selling more and more products to affinity groups other than clergy and teachers. They say they will stick with their own direct salesforces and have no plans to switch to selling more products through IFAs. They believe their own advisers can still offer a more specialised advice service to clients.

Ecclesiastical Insurance public affairs manager Brian King says: “Part of the problem with the life industry as a whole is a lack of faith. We feel our customers&#39 trust in us has not been eroded in this way and this is why they have kept their business with us.”

AMP&#39s announcement of its recovery plans saw its shares improve a little but there are clearly more changes ahead after a series of “cabinet reshuffles”.

AMP UK managing director Tom Fraser has been removed. He described the UK IFA market as an inefficient cottage industry in July and is thought to have been strongly against the splitting of the UK business into two divisions.

Just one day later, the departure of Ray Greenshields from Zurich Financial Services fuelled rumours that he could be winging his way back to AMP.


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