June 2012

Update from the Chief Executive


Welcome to the latest edition of Mutually Yours- the online newsletter from the Association of Financial Mutuals.  Please contact to be added to the distribution list.

The end of June marks the completion of the second full year of AFM.  It is too early in our history to step back too far and assess what we’ve accomplished or what has changed material over our tenure, but a few themes are becoming clear.

First, the impact of the financial crisis in the UK and the instability of markets across Europe continues to significantly undermine confidence, amongst consumers as well as industry, and there is little evidence of that disappearing soon. 

Second, financial regulation is becoming ever more intrusive; despite the best efforts of late from supervisors, the scale of change is greater than most can remember, and is materially diverting the attention of senior management away from running the business towards a combination of worthwhile consumer protection developments, but also to less relevant bureaucracy.

Third, and despite all the above, mutuals have grounds for optimism, due to the growing demand- from politicians and the public at large- for a return in financial services to the values of serving customers well, and working in their best interests. 

AFM is hosting a policy workshop this month to understand some of these issues further, and in particular to explore how the mutual sector can make a more compelling contribution to a more effective financial landscape in the future.

We explore these themes further in this month’s articles: I hope you enjoy reading this month’s edition of Mutually Yours-



If you have any comments, please contact


Also in this edition:

  • Benenden Healthcare votes to change membership criteria, and sponsors York City
  • Wesleyan:Samantha Porter named IoD Young Director of the Year
  • Xafinity Paymaster Annuity Industry Survey 2012
  • Tripartum: Putting trust back into customer communications


Please follow the separate links to these fascinating new articles, or visit the website.


1. AFM Activity

  • AFM Conference 2012

The booking website for the AFM conference is now live:  I’m pleased to report that we are already witnessing high levels of interest in both delegate and exhibitor packages.

The AFM Conference and AGM for 2012 will be held at The Belfry in the West Midlands, from 16 to 18 October.  The core theme for the conference will be around the value of mutuality, and we are beginning to pull together a really compelling agenda and range of speakers that will be relevant to CEOs, NEDs, senior managers and others interesting in developing a stronger and more effective mutual sector.

We will also be contacting previous exhibitors and sponsors, and Associate members, to invite them to play a part in this year’s conference.


  • AFM Policy Roundtable

Later this month AFM is running a Policy Roundtable in Westminster.  MPs, policymakers and AFM members will debate the basis by which the mutual insurance and friendly society sector can provide more active support to government policy initiatives.  This reflects the lack of real progress so far (in the mutual insurance sector) on the coalition agreement’s pledge to “foster diversity and strengthen mutuals”.

We are working with our PR agency Lansons to put forward a series of ideas for engagement with the mutual sector, and once we’ve had detailed input from the roundtable we aim to publish a Policy Blueprint which will be a key part of our lobbying efforts over the next 12 months.


  • Corporate Governance for mutuals

The AGM cycle has been in full swing recently, and I’ve had the pleasure of attending a number of member’s AGMs- as reported in a recent “Martin’s Blog”.  It’s been heartening to see the basis by which mutuals and their members can have an engaged dialogue.  We took a film crew into one AGM and plan to publish a short film on the Owned By You website, to explain the process and encourage more members to take part in future meetings.

Another aspect of the corporate governance cycle for AFM members is the annual corporate governance compliance exercise.  Members are asked to review how effectively they comply with the Annotated Corporate Governance Code and to report any major areas of non-compliance in their annual reports.  Alongside the exercise members also submit a return to the AFM online survey.  The deadline for submitting the online return in end of June, and with over half the responses already in I can report that overall levels of reported compliance remain very high- though with some members taking their time to consider/ implements some aspects of the Code that were amended in 2010.

A full report will be produced in due course and circulated to members as well as Treasury and the FSA ahead of the AFM Conference.


  • NED candidates for AFM members

With corporate governance under increasing scrutiny, we are finding that members are regularly appraising how effectively their Board or Committee of Management is performing and how the existing skill-set of the Board can be complemented by new Non-Executives.

One interesting early output from the Code compliance exercise described above relates to Board diversity.  Results in so far indicate that the number of female NEDs has increased since last year (14.5% from results to date), and that this is significantly higher than the number of female executives.   AFM recently contributed to a Treasury Select Committee inquiry into Corporate Governance, and we cited recent research from Nottingham University on the degree to which gender diversity improves business performance: link.

As a reminder, AFM has an extensive list of CVs for NED candidates.  We’ve added a number of new CVs recently, and members may wish to consult this in the early stages of recruiting new NEDs (or interims and project managers for that matter); you can view the public profile of each candidate via the link below, but will need to register or sign in to see the full CV:


2. Regulatory Issues

  • Mutual capital and with-profits

FSA’s Policy Statement on with-profits was issued earlier this year, and committed FSA to a further paper due, we believe, in September, exploring options for how to recognise mutual capital in those mutuals with a with-profits fund.

When FSA first considered this issue, in a Dear CEO letter in 2009, its view was that mutuals should achieve a clear mandate from members- or possibly policyholders- before any formal recognition of mutual capital.  Since then the sector has had extensive discussions with FSA to explore the consequences of its views.  These have reinforced that practice in mutuals varies considerably, such that no single approach is likely to work across the sector, and that as a consequence, the recent member consent achieved by Reliance Mutual, whilst important to their future strategic direction, does not set a precedent for others.

The AFM Board recently developed some high-level principles for engagement with FSA, designed to be relevant to all, and are using these as a basis for productive engagement with the regulator over the coming weeks.


  • Retail Distribution Review

It is just six months before the RDR is implemented.  I chaired a conference last week on “The future of life and long-term savings”, and the RDR was the main item for discussion, with big insurers highlighting both the scale of work that they’ve undertaken, and the scope for the review to be a game-changer for the sector.  In respect of the latter, the degree to which the investment market will change as a result of the RDR is still unknown.

FSA has accepted that the impact of the RDR will be disproportionate on Holloway friendly societies, whose products they view as having an investment element whilst accepting they are sold primarily as a protection product.  The regulator according provided an exemption for Holloway contracts with a low investment element, for which we are very grateful.  A small modification to the basis of that exemption is being introduced via consultation in September.


  • FSA Annual Report

FSA has this week published its Annual Report.  As well as providing a commentary on the diverse activities of the regulator, the report also reinforces the challenges faced it delivering efficient and timely regulation.  For example, of the 30 key milestones FSA set itself last year, it achieved only 50% as originally planned; equally it met just 63% of its 46 key service standards.

However the headline numbers don’t properly take account of the increasing difficulty the regulator has in controlling its own destiny.  With so much of the regulatory landscape now plotted in Europe, the recurrent delays in finalising EU Directives have a knock-on effect on UK regulation. FSA also deserves credit for slowing down the regulatory process when it realises- as it has done for example on with-profits- that it needs to take more time to engage with stakeholders and reflect on the consequences of proposed actions.

By the same token the difficult macroeconomic climate that Hector Sants refers to in his opening comments, affects regulators just as much as industry- and I suppose it is no coincidence that in like form, at each of the recent AGMs I’ve attended, the Chairman has opened proceedings by reference to the tough operating conditions.

If I do have some frustrations though they would be:

  • a quick perusal of the annual report suggests that the regulator could be more transparent about the obstacles to their own success, as well as more realistic about how the effects of changes to milestones have on firm’s ability to deliver; and
  • the report is badged as FSA’s final annual report: but with the timeline for the introduction of PRA and FCA uncertain- but at the very minimum nine month’s into FSA’s current financial year- it would be reasonable to expect that a further annual report next year would retain a focus on accountability during the transition period.


  • Other regulatory issues in brief
  • Solvency II: FSA is due to issues its second consultation on transition to Solvency II in July.  It is not yet clear yet what that will cover, as some of the clarity needed from Europe has taken longer than expected to finalise.  At the time of writing there has been no response from FSA to renewed expectation that the EU is planning to introduce Solvency II over a longer phased period; firms should continue to work to the existing and known timescales.
  • Handbooks for the PRA and FCA:FSA has produced a short guide for smaller organisations on how the FSA handbook will change with the introduction of the PRA and FCA: handbook
  • Special interest group:I was asked by FSA to mention that members of the Institute of Risk Management might want to be aware of the formation of a new Special Interest Group on‚Ä®Governance, Risk Management and Compliance (GRC).
  • Open forum on the future of UK GAAP for insurers:this event provided by the Actuaries Profession on 5 July, covers the period between Solvency II and IFRS 4 Phase II coming into force, and affects both life and non-life insurers which do not use IFRS in their statutory accounts:


3. Political issues

  • Simple financial products

The Treasury launched this work at the end of last year, and set an ambitious target for the working group chaired by Carol Sergeant to put forward proposals for a new system of financial products by July.

It has been very useful to be involved in this work, during which I’ve seen increased ambition from industry and consumer representatives alike to develop a new regime.  As such it is likely that the proposals presented to the Minister will include specific product proposals, as well as ideas for how to market the regime, selling simple products and endorsing approved suppliers.  In particular the proposals for a simple income protection product hold great promise, drawn as they are from notions already built into many Holloway friendly society contracts, and based very much on the needs of the target audience.

It remains unclear what the market for simple products will be like- but evidence from the Child Trust Fund suggests that mutuals are well-placed to serve those people who are currently disengaged from longer-term financial provision.


  • New tax regime for life insurers

Earlier this week the AFM Tax Committee hosted a well-attended training seminar on the new tax regime for life insurers, which is being introduced from 1 January 2013.  The Tax Committee presented the new proposals and clarified the work that mutuals need to undertake to prepare for the changes.  Copies of the slides will be available to view on the AFM website shortly.

It is true to say that the Committee has been actively and constructively engaged on the development of the new regime, with regular and productive discussions with HMRC.  This has helped to shape the new regime in a way that avoids significant change for most mutuals.  Indeed the Finance Bill which finalises the new arrangements is completing its debating process through Parliament, and earlier this week the Labour MP and co-Chair of the All-Party group on Financial Mutuals, Cathy Jamieson led a spirited discussion on the impact of the changes on mutual insurers and friendly societies.  In response Mark Hoban MP, the relevant Minister assured the Bill Committee: We are able, as a consequence of this move, to cut the number of pages of regulations for existing friendly societies from 38 to 7; that is of use to them and I hope it is welcomed by them”.

For more see: Cathy Jamieson speech


  • Other government activity in brief
  • FATCA: I’ve commented on this a number of times, so I hope most readers are familiar with the impact on financial institutions worldwide of this new US Act.  Recently we responded to a US consultation, which since resulted in us working with HMRC to explore ways in which it can reduce the very punitive impact of the proposals; we are hoping to hear soon that a compromise has been reached.


4. AFM events

  • AFM Tax training seminar: the AFM Taxation Committee ran a very-well attended training seminar on 18 June, covering changes to the Life tax regime and other developments in mutual tax. 
  • Smaller societies and mutuals Forum: the next meeting will be on 27 June, at the offices of Norton Rose, with a wide and stimulating agenda, including an update from the regulators, sharing best practice, corporate governance and communicating mutuality.
  • Larger members forum: KPMG hosted an inaugural meeting in London on 28 February, focused on Solvency II form firms with internal models, and there are further sessions for specific audiences in July.
  • CFO network: The most recent meeting of the network was on 23 January 2012 at the offices of Barnett Waddingham in London; there was an excellent attendance, and we are planning a further meeting of the network later in the year; the agenda will be announced nearer the time.
  • COO network: the latest meeting of the network was held on 18 April at the offices of IFDS in Basildon, with discussion likely to centre on social media; MiFID 2; the importance of networking; RDR and HR management. Since the meeting aLinked-in network has been developed to enable COOs to continue dialogue between meetings.
  • Corporate Secretaries/ Compliance Officers Network: the network met on 28 February 2012, at the offices of BDO in London, and items covered included the Approved Persons regime, RDR, the role of NEDs in ensuring fairness, the new regulatory regime and asset reunification. 
  • Internal Audit Network: the latest meeting of the Internal Audit network was due on 26 January, at the offices of Littlejohn LLP in Canary Wharf.  A further meeting will be planned for later in the year.
  • Risk Network: The latest meeting of the network took place on 22 March, at the offices of Towers Watson.  The meeting in particular explored interest in measuring risk culture, and some AFM members are working with Towers Watson to develop these ideas further.


5. There’s more to AFM…

For more information on the work of AFM, visit our websites: for members and all professional contacts for consumers for the youngest children, their parents and teachers for 7 to 11 year olds, their parents and teachers


You can contact us by:


< Back