Michael Leahy, managing director of Prudential International Assurance, said over the next 12 months there will be “consolidation and lots of conversations going on in the background”.
“RDR has put a lot of pressure on price and scale is becoming important”, he said, suggesting that it would be specialist consolidators rather than the “more obvious big companies getting together” targeting the books of life contracts.
Earlier in the day, FundLinks life company delegates were polled on whether there was a more than 50% change that their company would be bought in the next 12 months, and 25% said yes.
Leahy said he voted no, while Graham Morrall, Hansard International’s global sales and marketing director, said his company was well capitalised and he “doubted” any changed in ownership in the next 12 months.
Mike Foy, managing director of Axa Wealth International, did not respond to speculation that French insurer Axa Group may be looking to sell off all of its UK businesses.
Reports had suggested Barclays has been appointed by Axa to handle the sale on its behalf.
Dylan Emery, group editorial director of Last Word Media, who chaired the debate, also asked Foy to imagine if he had an opportunity for a different ownership structure if he had a way of influencing events.
Foy pointed out that he had “worked for Axa for 16 years, a huge global group bringing huge benefits. We’ve had a flat UK market, we’ve written 4% of our volume out of Hong Kong and that’s entirely because we have a local business in Hong Kong”.
“So all the talk earlier today about how local insurers are starting to squeeze out cross border insurers- that’s one of us. That’s come about because we’re part of a huge global group. Everyone wants financial strength”, he added.
Tom Kenny, managing director of Canada life International, said his business was not going to be sold given that it had just been through a consolidation exercise after Legal & General International got acquired by the Canada Life Group earlier this year.
He added that Canada Life was “very committed” to the UK offshore market.
David Kneeshaw, chief executive of RL360°, said: “99% of the answer is no [on chances of the business being sold in 12 months] but if somebody wants to make an offer and if it’s suitable at a premium then no problem.”
“The reality of life of running any business, whether it’s a division of Royal London or now it’s an independent business, is that you want to have the capital and commitment from the parent to put into effect a plan you believe in that has some sort of resonance in the market.”
Kneeshaw added that he was lucky when the business was with Royal London as it was very hands off and the new private equity investors had been “a great experience”.
“They don’t see themselves as quasi managers, they see themselves as investors, and so their role is as shareholders checking their investments is going in the right direction and if it is they won’t get involved at all so our experience is extremely hands off. It could be because we are doing quite well at the moment. I’m sure if we weren’t they would fire me, perhaps more quickly than an old fashioned life company would.”
Clive Baker, chief executive of Zurich Life International, highlighted how “big companies are not emotional in their investments and their subsidiaries so I don’t think anyone could say ‘no we are never going to sold or taken over’.
“The answer is to meet the return on capital that the parent wants and within risk appetites. We’re certainly doing that.”
After ranging across information flows on underlying fund data and identifying which markets and underlying clients are coming from, the six international life company chiefs revealed in which markets they were looking to expand.
Baker said he was still very positive on the Middle East where Zurich had been based for a long time, with great relationship with brokers and customers. He also felt that although Hong Kong was going through a lot of regulatory change, the medium term prospect was that it would come good.
Kneeshaw said RL360°’s biggest region was Asia, with the Middle East in second place, and having only recently moved into Latin America.“
If you taker Latin America, we take a different view on every country, about the risks it faces, the governance it has, whether you are happy to target domestic or expats, or single or regular premiums. We’ve probably got 20 different approaches ranging from nothing to something.”
Foy said Axa Wealth International had a binary split of its business between Hong Kong plus “soon to be in” Singapore, and the UK. We’re confident about the fundamentals of the UK market, so while it is fairly depressed at the moment we think it will come back.”
He added that he had a very bullish macro view on Hong Kong and Singapore in terms of the wealth generation and maturing savings patterns, and an emerging middle class in mainland China.
Kenny said Canada Life International was number one or two player in the offshore UK market.
Sheahy, for his part said Dublin-based Prudential International Assurance was very UK centric, and had seen huge growth in the last couple of years. He felt there was an opportunity to grow the offshore market into the UK, not just taking market share from others.
“The huge step change on the back of RDR is advisers are more into tax structures, and tax advice and insurance products are really powerful in terms of doing trust and IHT planning. And the increased professionalism has come true which is creating a lot more opportunities in tax planning.
Morrall, however, said technology was “by far our biggest opportunity. It’s quite a challenge because you have clients who want to do thing online and you have an adviser group that doesn’t, and how do you mould the two together. We’ve been developing our technology since 1999, we have truly straight through processing and using that around the world is our biggest opportunity.”