May 2010

Update from the Chief Executive

2010 has been a lively year so far for AFM, but also of course for mutuals on the whole, with contradictory messages about the future prospects of the sector. This week the government announced that payments to the Child Trust Fund would cease at the end of the year. AFM members manage over half of all CTFs, and are therefore most significantly affected- that clearly has consequences for a number of mutuals, although the two million plus new policyholders it has introduced to AFM members will stay in the sector for many years to come.

I take further comfort from recent research from AFM Associate member AM Best, which indicates that mutuals have overall performed well through the recent financial crisis. Let’s hope that continues.

I hope you enjoy this month’s newsletter; as ever I welcome any comments, and suggestions of topics for the future.


If you have any comments, please contact

1. The AFM Conference, 2010

I am pleased to confirm that the first annual conference and AGM of the Association of Financial Mutuals will be held at the Merchant Taylor’s Hall in Central London on 18th and 19th October.

This is an outstanding venue, a short walk from the Bank of England, and the event is sure to attract a high attendance, stimulating exhibitors and impressive speakers.

Look out for full details of the agenda, booking information and hotel options in the near future- interest so far indicates this event will sell out. For details of the venue see:

2. Common Promotion

The Common Promotion provides a very clear presentation of the mutual advantage. Alongside the promotion we look for evidence to support those advantages- elsewhere in this month’s edition we talk about the ‘dividend drag’- the loss of value to customers in PLC companies who have to pay a dividend to shareholders. Last month’s Mutually Yours looked at performance aspects, and demonstrated that returns from mutuals significantly exceed non-mutuals. Next month Mutually Yours will feature an article of superior service in mutual.

AFM encourages all its members to include a copy of the Common Promotion on their website.

For more information, see: Common Promotion.

3. Annotated Combined Code, 2009 compliance

The larger AFM members have now provided their response to the 2009 compliance exercise; initial analysis indicates the position overall is stable compared to 2007 and 2008. Smaller AFM members are reminded that they should send in their compliance return by end of June.

There is significantly more focus this year on transparency and accessibility, with the intention of providing a link from the AFM website to each company’s Corporate Governance statement. AFM will report more broadly on industry trends, to support mutual’s own efforts to benchmark their governance standards and seek areas for continuous improvement.

The last government announced in December that Treasury would be undertaking a review of all governance codes in mutuals. We support the intentions of this work and AFM stands ready to sit on a panel charged with looking at raising standards as well as the possibility of a single code for all mutuals. That said, we remain happy with the effectiveness of our own Annotated Combined Code, and as yet we have not heard whether the review will continue under the new government.

4. Regulatory Issues

  • Dear CEO letter to Mutuals with a with profits fund

It is now five months since FSA received firms’ initial response to the Dear CEO letter. Since then FSA has stressed that it is looking carefully at each response and has asked follow up questions of many AFM members. The approach, with which we agree, is to respond properly rather than quickly.

As mentioned last month Telos (AFM Associate members) have set up a forum on the Linked in site. AFM members and Associates can access the forum, and I encourage you to visit and comment as appropriate:

In the meantime it is expected that the wider review of with profits that FSA has been undertaking over the last nine months has been completed, and a paper is due to be issued in June. FSA’s recent life insurance newsletter indicated a review of some of the with profits rules would follow, and AFM is keen to engage on this.

  • Retail Distribution Review

The RDR is another big thematic review for FSA. The series of papers released from the regulator is ongoing. AFM has responded wherever appropriate- recent issues include the impact of RDR on non-advised/ introduced business, which FSA has now confirmed is outside scope, and the extension to protection products, including Holloway. We have also pressed FSA to consider how it responds to concerns that only the most affluent will enjoy access to independent advice, and thereby seek greater clarity around its views on simplified advice, as well as its approach to basic advice.

We continue to believe the RDR will have a significant effect on the sector- though undoubtedly there will be opportunities as well as risks.

  • FSA seminar for smaller insurers

FSA’s seminar for smaller insurers will be held in Canary Wharf on 10 June. FSA are keen to see a high level of attendance, and following pressing by AFM at the recent FSA Insurance Conference, are running this event at the very low price of £30. I hope therefore as many AFM members as possible can attend.

The main focus of the day will be Solvency II, and with QIS5 to be unveiled in a few months’ time, and new rules in development for non-Directives, there will be plenty of relevant material. FSA will also be explaining their new approach to supervising smaller firms, and will be looking at stress testing requirements.

5. Political issues

There is a separate article in this edition of Mutually Yours on the agenda of the new government. Whilst this signals greater support for mutuals, no-one is under any expectation that this will outweigh the effects of the austerity measures now necessary.

The challenge therefore seems to be to explore ways in which mutuals can enter new markets, or where new mutuals can be created to help support government’s commitment to helping mutuals and co-operatives become more involved in the running of public services.

Following this week’s announcement on the Child Trust Fund AFM has written to Mark Hoban MP, Financial Secretary to the Treasury to seek an early meeting to explore how the government can fulfil its promise to provide a robust mutual sector. A copy of our statement can be found on the AFM website:

6. New Associate members

Our Associates provide significant financial and technical support to AFM members. With over 30 Associate members there are few services required by mutuals that cannot be met by them.

At its meeting in April, the AFM Board approved three new Associates members:

  • BNP Paribas boasts a long tradition in investment management and private banking. With expertise in investments and financial management, BNP Paribas has served valued clients for more than a century. Worldwide, BNP Paribas Wealth Management today manages assets valued at more than £160bn, and is rated AA by S&P.

BNP Paribas Wealth Management, via its base in the City of London, has over 24 fund managers looking after over 3,000 UK and international clients. BNP Paribas, in their approach to the Friendly Society and Mutuals sector, focuses on both the distinct disciplines of fixed interest and equity fund management, adopting an active style which is tailored to clients requirements. At BNP Paribas, you benefit from the strength of a group which has at its disposal a global network of the highest calibre and a full complement of human and technical resources.

Please contact your dedicated team: Jacqueline Crawley, Senior Wealth Manager & Independent Financial Adviser, BNP Paribas Wealth Management, Level 8, 5 Aldermanbury Square, London EC2V 7BP

  • IFDS is a joint venture between DST Systems and State Street. Both organisations have over 30 years experience and joint venture track record via our sister company Boston Financial Data Services (BFDS). Together we form part of the world’s largest investor record-keeping / transfer agency services provider. Our mission is to be “the leading provider of investor record-keeping systems in the administration services in the UK investment industry”.

DST and State Street purchased The Administration Partnership Ltd, a transfer agency joint venture of Gartmore and Henderson in 1995, and renamed the company European Financial Data Services (then 5 years later changing it to International). In January 2003 IFDS agreed to supply Cofunds, the leading distributor fund supermarket and consolidation platform, with our record-keeping technology. In 2006 we supported Virgin Money with a combined fund, cash and pension client proposition. In 2008 to further strengthen our Pensions offering IFDS acquired a substantial minority interest in Percana Group. Percana have 100 employees and 12 clients.

International Financial Data Services, IFDS House, St Nicholas Lane, Basildon, Essex SS15 5FS

  • Xafinity Paymaster is the largest business unit within the Xafinity Group and is the UK’s premier specialist in pensions administration, collections and payments paying over £11 billion annually to 2.2 million pensioners. These pensioners include over 0.5 million annuitants serviced on behalf of UK insurance companies. We are one of the leading providers of outsourced pensions administration services to both the Public and Private sectors and are responsible for the management of over 865 schemes including those run by organisations such as GlaxoSmithkline, Metropolitan Police, LV=, Mineworkers Pension Scheme and many others.

We are aware that mutual insurers and friendly societies are facing increased scrutiny and pressure from the FSA, Solvency II and the economics of staying in business. They have to recognise the forces of change, the need to be doing better and the need to be looking for different solutions. They are under increasing pressure to demonstrate growth particularly when there is a mood against With Profits. We believe that we can assist them.

Keith Boughton, Director Insurance & Payroll, Xafinity Paymaster

7. AFM events

  • COO network: the network will be meeting at the offices of Family Investments in Brighton on 30 April. As well as presentations from a number of Associate members, there will be plenty of opportunity to exchange views and find out what colleagues in the sector are doing. The full agenda is available on the AFM website.
  • Smaller societies and mutuals committee: all AFM members who meet the definition of a smaller company within the ACC have been invited to attend this group. The first meeting is on 26th May at the Holiday Inn Stratford.
  • CFO network: The next network meeting is due to be held on 1 July. I will be writing to previous attendees shortly regarding agenda, presentations and venue.
  • Corporate Secretaries/ Compliance Officers Network: we are beginning to consider the timing and agenda for this network, which combines two broadly similar groupings from AMI and AFS respectively. More details to follow.

For more information on the work of AFM, visit our websites:

www.financialmutualsorg for members and all professional contacts for consumers for children, parents and teachers

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