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Laurence

How do you achieve a successful acquisition in insurance?

Read more: Markerstudy’s Gary Humphreys discusses group’s BGLI deal

Markerstudy has had significant practice in completing acquisitions and, for Humphreys, the key to that success comes down to two elements – people and systems. In a certain sense, he said, the systems part is easy because you’re essentially just dealing with data. The people piece, however, is the one that is critical to get right because you need to make sure you’re creating the right culture and atmosphere across the wider group.

“You want people to buy into the Markerstudy culture,” he said, “but you don’t want to lose any of the good bits of the acquisition you’ve made. It’s about getting that balance right and keeping people motivated, and, in a lot of cases, it’s about reassuring people. The uncertainty of a takeover is always the same and people do worry about the future.

“So, quickly getting round and reassuring people that the future looks good and the acquisition was made for all the right reasons and is not going to be a negative thing, is [critical]. And it’s exciting when meeting lots of different people in the businesses you acquire, you get lots of opportunities to listen to different ideas. And people’s views from outside of your own business on how they view Markerstudy are good to take on board as well.”

Looking at the hallmarks of a successful acquisition, he highlighted the need for careful consideration prior to any negotiations. Markerstudy doesn’t believe in what the City would call “hostile takeovers” and isn’t looking for businesses with teams that are not aligned with the direction an acquisition might take them in. It’s very difficult to change a negative culture, he said, and so the group spends a lot of time with the key stakeholders of any deal before it is struck to make sure that alignment is there.

“I think we’ve got a good reputation for being fair with people’s businesses when we buy them, whether they want to stay with the business or whether they want to exit,” he said. “We stick to our word, we’re not the business that re-negotiates a deal six months down the line. We agree what we’re happy with upfront and we stick to it. And I think that’s important, both for the businesses that are selling and for the people in those businesses, because they hear what’s going on and they buy into that message of continuity.”

This emphasis on people is why Markerstudy is drawn to acquiring businesses with a great team in place, and Humphreys noted it was one of the main attractions of the group’s recent BGLI deal. It’s always the same when you do a large acquisition, he said, in that the acquired business will have several items in their work stack that they haven’t worked on yet but which represent exciting opportunities. And, in order to make the most of those opportunities, you need to have the right talent in place to take those initiatives forward.

As with so much else in life, success begets success in the M&A space and having a good reputation among advisors in the market self-generates new opportunities. Advisors value a strong relationship where they can rely on smooth execution, as it makes their job easier if they can put forward an offer that they know the acquiring company can deliver on. Markerstudy’s purchase of the underwriting business of Co-op was probably the hardest integration the group has done to date, given the number of legacy systems involved, he said. But delivering that within the timescale the group did sent a clear message to the wider market – that its integration team really knows its stuff.

“[In terms of M&A], we’re not restricted to any particular segment,” Humphreys said. “With the Clegg Gifford acquisition, we’re pushing the Lloyd’s broker angle in the commercial SME market. So, if we see acquisition opportunities that fit with any of our portfolios, then we’re willing to look. And obviously, the bigger the scale, the better now, because each acquisition tends to be bigger than the last one. Not that there are that many bigger than BGLI out there.”

M&A is one strand of Markerstudy’s strategic direction for the rest of 2022 going into 2023, and another current area of focus is on the group’s expansion into the home insurance market. Markerstudy is already very dominant in the motor insurance space, he said, and is now looking to further broaden its offering. Its Co-op acquisition gave it a small window into the home insurance space, which was then expanded through the BGLI deal, and now the group is looking to maximise the opportunity there for growth.

“So, the opportunities now coming from the combined group are just really exciting,” he said. “It’s all about where we can take this to. Every time we do a large deal, as we did with Co-op, you think ‘oh that’s great’ and you take the time to stop and breathe and bed that down. But then you do another one and another one, and you feel that constant excitement of ‘chasing the rainbow’. That’s what we’re really excited about this year. And working through all the new opportunities with our [acquisitions] and our new people is really good fun.”

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How satisfied are Brits with their insurers?

The study, which surveyed 2,000 consumers and 403 insurance purchase decision makers at UK businesses, said that the pandemic has positively reinforced buyers’ perceptions of insurance, with nearly half of consumers (41%) and businesses (42%) reporting that the pandemic has made them appreciate the importance of insurance policies much more. The study also said that the respondents form part of a largely engaged and satisfied customer base, in an industry with already solid foundations.

“The headline insights about satisfaction levels post pandemic are encouraging,” said Nigel Teasdale, commercial director of insurance at DWF. “The insurance industry will no doubt greatly welcome the fact that buyers’ perceptions of their services appear to have not been adversely impacted by the pandemic.”

However, both groups said that improvements can still be made to the insurance buying process. Sixty-six per cent (66%) of consumers and 70% of businesses said that choosing or buying an insurance policy is always a difficult process. Both groups agreed that there is a need for clearer policy documents, with policies written in plain English with greater clarity around product information, especially more transparent explanations of any caveats or exclusions.

Both consumers (61%) and businesses (78%) want greater personalisation and customisation of policies. However, both businesses and consumers lack knowledge of, and confidence in, these matters, with more than 70% of both groups of buyers wanting to know more about the benefits of personalisation and customisation.

Consumers have concerns about data security in relation to personalisation. Nearly half (49%) of consumers believe that personalisation means they will lose control over their data. Meanwhile, 45% do not feel comfortable about insurers having access to or using their personal data to inform products. This highlights a need for more information around data protection and the benefits of personalisation, the report said.

The study found that younger consumers have higher expectations of their insurers, with those aged 18 to 24 more likely to have felt let down by their insurer (32%) compared to any other age group (average of 16%). This dissatisfaction stems from a perceived lack of empathy and support from insurers, the study said.

While their expectations may be higher, younger consumers are also willing to pay more. Around a quarter of 18- to 24-year-olds are more likely to consider paying higher premiums for all insurance types, compared to 10% of those aged 55+.

“There are some parts of the research that insurers will hopefully find of interest for their product lines and development, specifically around businesses and consumers wanting a more nuanced, tailored and responsive service from their insurers,” said Claire Bowler, global head of the insurance sector at DWF. “Younger customers in particular seem willing to pay for more innovative, personalised and customised products which gives insurers the perfect opportunity to refine their offering, develop new solutions and forge enhanced relationships with their customers.”

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Allianz investment arm pleads guilty to securities fraud

Allianz investment arm pleads guilty to securities fraud

Allianz SE has confirmed that its indirect subsidiary, Allianz Global Investors US LLC (AGI US), will plead guilty to criminal securities fraud and pay $5.8 billion after misrepresenting the risk posed by a group of its hedge funds that were rocked by pandemic market conditions.

In a statement, Allianz SE said AGI US had entered settlements with the US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC or commission) regarding the Structured Alpha Funds issue after the commission established that it violated relevant US securities laws. A Bloomberg report revealed that the total payout, including a $1 billion fine to the SEC, is covered by provisions the company has already taken.

Manhattan US attorney Damian Williams confirmed through Bloomberg that Gregoire Tournant, former chief investment officer and co-lead portfolio manager of the Structured Alpha Funds, was taken into custody on Tuesday and charged separately for his role in the alleged scheme to defraud investors. Specifically, prosecutors said Tournant and two portfolio managers overstated the level of independent oversight AGI US was providing, misrepresented hedging and other risk mitigation strategies, and altered documents to hide the riskiness of the funds.

“As a result of this scheme to defraud, investors’ funds were exposed to higher risk than promised, and investors were deprived of information about the true risks to which their investments were exposed,” according to Tournant’s indictment, as reported by Bloomberg.

Meanwhile, Allianz claimed that the DOJ’s statement of facts showed that AGI US’s criminal conduct regarding Structured Alpha Funds was limited to a handful of individuals in its Structured Products Group, no longer employed by the company. Moreover, the DOJ’s investigation did not find any knowledge of, or participation in the misconduct at Allianz SE or any Allianz Group entity.

Allianz expects the guilty plea to disqualify AGI US from advising US-registered mutual funds and certain types of pension fund after a temporary relief period. It also expects the SEC to issue waivers to ensure that AGI US’s resolution with the DOJ does not impact PIMCO and Allianz Life’s business.

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Lockton scores highest year-on-year revenue growth in company history

Lockton scores highest year-on-year revenue growth in company history

Global insurance broker Lockton posted record-breaking revenue of US$2.69 billion (approx. £2.2 billion) in the 2022 fiscal year ending April 30, representing 27% growth from the previous year, most of which was considered organic.

US-headquartered Lockton is a privately-owned brokerage with approximately 9,000 associates doing business in over 125 countries. Over the past 12 months, the firm tipped the talent trend, adding over 1,200 people across all lines of business. It also achieved successful geographic market expansion, with new offices in the US, Europe, Scandinavia, New Zealand, and Latin America.

Lockton chairman Ron Lockton said the insurance broker’s record-breaking revenue was driven by its “amazing people who are passionate about serving clients.”

“All credit belongs directly to them. I’m proud that our private ownership allows us to pursue a long-term strategy where our decision-making focuses on our clients, our people, and our communities,” Lockton continued.

Meanwhile, Lockton CEO Peter Clune said the broker’s organic growth strategy required a “different skillset where you’re attracting people and clients one handshake at a time.”

“We are posting significant organic growth numbers in a brokerage industry where growth is typically driven by mega mergers, large acquisitions, and private equity roll-ups,” he said.

Lockton continues to build innovative capabilities to meet client needs, including investing in transaction, liability, cyber, surety, and marine.

“We’ve experienced seismic momentum over the last 36 months, and after 56 years, we’re just getting started,” Clune said.

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Chartered Insurance Institute reveals financials

Chartered Insurance Institute reveals financials

The Chartered Insurance Institute (CII) has bounced back from the challenges of 2020, reporting a consolidated surplus of £3.3 million for 2021 (FY21) compared to a £4 million operating deficit in the previous year (FY20).

It also reported a £2.2 million increase in revenue from qualifications and educational activities in FY21 compared to revenue in the previous year as insurance and personal finance professionals moved to develop their knowledge and skills. Another financial milestone during the same period was the CII’s buy-out of the defined benefit pension scheme, with an initial buy-in of £6.6 million as the first step of the process completed within the period.

CII interim CEO Jonathan Clark commented: “We are pleased to see income building while we carefully manage costs in what continues to be a challenging environment – 125 years since the CII was formed by the coming together of local institutes, we are proud to continue to deliver learning and networking that enables today’s insurance and personal finance professionals to develop their skills, knowledge, and expertise.”

Meanwhile, CII chair Helen Phillips thanked the professional body’s members, students, corporate customers, volunteers, trustees, and staff for helping it recover from the challenges in 2020.

“Revenue has been achieved, thanks to the continued commitment of insurance and personal finance professionals to learning and their support and engagement with membership events,” Phillips continued. “The progress achieved helps provide a sound base for the development of the CII’s next five-year strategy, which will focus on continuing to rebuild post pandemic.”

The release of the CII’s FY21 financial statement follows the appointment of Alan Vallance as its new chief executive to lead the professional body’s five-year plan.

The CII will publish its annual report and share it with the volunteers leading local institutions, personal finance regional committees, and membership societies at the Ambassadors in Action conference in Birmingham on May 17.

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Insurance body’s AGM delves into mental health

Insurance body's AGM delves into mental health

Nearly 100 people attended this week’s annual general meeting of the Association of Medical Insurers and Intermediaries (AMII) in Warwickshire – hearing from speakers including former BBC and Sky news correspondent Mike McCarthy, whose son took his own life more than a year ago during lockdown.

In McCarthy’s keynote speech, which was delivered in the middle of mental health awareness week, the journalist shared his personal lessons in loss and hope. McCarthy has been campaigning for better mental health provision in the UK since his son’s passing.

“We have had hugely positive feedback from what was a thought-provoking, and at times very emotional event,” said executive chair David Middleton (pictured) of the May 11 gathering at the British Motor Museum.

“Mike McCarthy’s talk was incredibly powerful. Most of the audience were in tears and he got a standing ovation. The lessons we can all learn about Mike’s tragic loss were particularly resonant during mental health awareness week.”

AMII, which has more than 120 intermediary and insurer members, highlighted that suicide is the biggest cause of death for men under 35 in the country.

Meanwhile, the other speakers were Bupa Global medical director Robin Clark, Myogenes chief executive Clare Brenner, and Branko Ltd director Branko Bjelobaba.

The latter spoke about the new consumer duty rules, as well as the issue of multi-occupancy buildings insurance; Brenner tackled tailored patient diagnostics and treatments; and Clark discussed innovations in cancer screening, diagnostics, and prognosis.

“We heard some fascinating insights into the potential future of healthcare diagnosis and delivery, home testing, and the power of our genes to fuel the development of truly personalised healthcare,” noted Middleton.

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Aegon publishes results for first quarter 2022

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Q1 2022 net result

Q1 2021 net result

Q1 2022 operating result

Q1 2021 operating result

Americas

€(176 million)

€122 million

€166 million

€161 million

The Netherlands

€156 million

€228 million

€187 million

€184 million

United Kingdom

€78 million

€(11 million)

€51 million

€39 million

International

€408 million

€37 million

€47 million

€30 million

Asset management

€41 million

€52 million

€68 million

€75 million

Holding and other activities

€(94 million)

€(41 million)

€(55 million)

€(59 million)

Group

€412 million

€386 million

€463 million

€431 million

According to the insurer, its €412 million net result in the period is partly attributed to the €372 million book gain from the sale of the group’s businesses in Hungary. More on that transaction here.

As for Aegon’s higher operating result, the company offered this explanation: “Operating result increases by 7% compared with the first quarter of 2021 to €463 million, as a result of an improvement in claims experience in the United States, the positive contribution from growth initiatives, increased fees from higher equity markets compared with the first quarter of last year, and favourable impacts from currency movements. These more than offset the impacts of increased benefit costs and outflows in variable annuities in the Americas and higher expenses.”

The group’s Solvency II ratio, meanwhile, stood at 210%.

“The first three months of 2022 have been unprecedented in many ways,” commented Friese. “The Russian invasion in Ukraine has had a devastating impact on the lives of many people and fuelled inflationary pressures and volatility on the global financial markets at a time that many economies were opening up after relaxing COVID-19 measures.

“I am proud of our colleagues who continued to effectively support and service our customers in a turbulent environment as evidenced by our results, and the substantial progress we made on our 2023 strategic and financial objectives.”

Part of Aegon’s strategy was to develop a “rigorous and granular” operating plan across the organisation, with the goal of re-allocating capital to growth opportunities. At the same time, Aegon is improving its risk profile and reducing capital ratios volatility.

The CEO noted: “We continued sharpening our strategic focus and increasing our financial flexibility with the completion of the divestments of our businesses in Hungary and Turkey to Vienna Insurance Group, and the sale of part of our European venture fund.

“The closing of the sale of our Hungarian businesses resulted in an increase in cash capital at the Holding to €1.8 billion. This enabled us to announce a €300 million share buyback programme and a further reduction of our debt, thereby reaching our deleveraging target range 1.5 years early.”

Aegon’s operational improvement plan consists of over 1,200 detailed initiatives designed to improve operating performance by reducing costs, expanding margins, and growing profitably. Of these initiatives, more than 900 have already been executed.

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Allianz very likely to fully exit Russia over Ukraine war – CFO

Allianz very likely to fully exit Russia over Ukraine war - CFO

Insurance giant Allianz has already stopped accepting new business in Russia amid the Russia-Ukraine conflict. Now, chief financial officer (CFO) Giulio Terzariol has said the insurer is very likely to cut all ties with the country.

After the release of Allianz’s financial results for the first quarter of 2022 (Q1 2022), Terzariol said the insurer is very likely to rule out new insurance and investments in Russia after it invaded Ukraine.

“I would define the likelihood as very high,” Terzariol said when asked by reporters about the chances of closing the insurer’s operations in Russia, as reported by Reuters.

In an analyst presentation, Allianz said its bottom line could take a hit of between €400 million and €500 million from discontinuation of its Russian insurance subsidiaries.

Allianz is not the only insurance company that wants to cut ties with Russia. Marsh McLennan, for example, said in March that it will exit its businesses in Russia following the “unprovoked attack by the Russian government against the people of Ukraine.”

During the same month, Willis Towers Watson (WTW) announced its intention to shift the ownership of its Russian businesses to local management whose operations will be independent from that of the group. Meanwhile, Aon Plc (Aon) suspended its operations in Russia as it continues to observe the ongoing war.

In April, Arthur J. Gallagher & Co. (Gallagher) confirmed in its announcement of its Q1 2022 financial results that it did not have offices or direct operations in Russia and Ukraine. It had a small number of clients based in or operating in Russia, but it severed ties with those clients. It also implemented robust procedures to comply with all applicable sanction laws.

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Lloyd’s urges members to attend AGM online amid risk of climate protests

In June 2021, climate protestors laid a sensory assault on Lloyd’s of London, setting off a stink bomb outside the main entrance of the world’s oldest insurance marketplace to protest its ongoing support of fossil fuel projects.

This followed shortly after the same group of activists, known as Insurance Rebellion, used a tipper truck to dump a large pile of fake coal at Lloyd’s headquarters in April, blocking the entrance with two meters cubed of black rubble.

Concerned about similar incidents, Lloyd’s hopes that holding its 2022 AGM virtually will ensure its members’ safety and security, and allow for the meeting to proceed in an orderly and fair manner.

“It is with regret that I must now strongly encourage all members attending the AGM to join virtually and not attempt to enter the Lloyd’s building on that day,” said Carnegie-Brown.

Lloyd’s distributed the invitation to its members, which included instructions on joining the virtual meeting and the AGM Guidance Document referenced within. It also encourages its members to submit their questions to the Lloyd’s Secretariat team in advance, where possible, to maintain the smooth conduct of the online meeting.

Lloyd’s has been facing protests from climate campaigners for many months, revolving around insurance coverage for industries that could worsen climate change.  

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Revealed – the main advantages of electric cars for consumers

A recent report from Insurance Business (IB) outlined several of these advantages in addition to raising that all-important question – are electric cars cheaper to insure than petrol or diesel vehicles?

So, what are the benefits of electric vehicles?

  1. Lower fuel costs

As the report by IB’s Mark Rosanes highlighted, the largest savings made by drivers in the switch to EVs is around the cost of charging the vehicles rather than having to pay for petrol or diesel.

Data gathered by LV= revealed that EV drivers pay just £467.40 on average to charge their cars annually, based on driving 8,000 miles, while those who use petrol and diesel to fuel their vehicles pay £1,199.40 to cover the same mileage – a £732, or 61%, difference.

LV= also found that if motorists have an electricity tariff with a reduced off-peak overnight rate, then the annual cost of charging an EV is reduced even further to just £180.59.

  1. Tax exemptions

Tax exemptions are a core benefit of opting for an EV as, due to the fact they produce zero emissions, they are exempt from road tax and congestion charges. In addition, drivers will also pay just 1% benefit-in-kind (BIK) tax. Meanwhile, the owners of petrol and diesel cars are required to pay £155 in car tax from the second year of the vehicle’s purchase onwards – apart from a one-off first-year rate, which varies depending on how much carbon dioxide (CO2) the car produces.

  1. Access to government grants

On the subject of government grants, the UK government offers up to £2,500 in financial assistance for buyers of electric cars worth under £35,000 under the Plug-in Car Grant (PiCG). Over half of all EVs available on the market – including the Fiat 500e, Hyundai KONA Electric, Mazda MX-30, Nissan Leaf, Peugeot e-208, Renault Zoe, and Volkswagen ID.3 Pro – are eligible for this discount.

EV owners can also access a range of government-sponsored benefits for installing electric car charging points in their homes such as the Electric Vehicle Homecharge Scheme (EVHS) for flat owners and tenants, and Energy Saving Trust Home Chargepoint Funding for Scottish residents.

  1. Lower maintenance and servicing costs

As EVs traditionally have fewer moving parts than their petrol and diesel equivalents, they are less likely to break down as they age and, so, are also much cheaper to maintain. Average annual maintenance costs, which include a service and replacement tyres and brakes, are almost £200 less expensive, according to LV=’s index.

Read more: What are the benefits of electric vehicles?

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