August 2010

Update from the Chief Executive

profile-pictures-shawWelcome to the summer edition of Mutually Yours- the online newsletter from the Association of Financial Mutuals.

August is traditionally the month where regulators and policymakers disappear to warmer climes- though not before presenting the industry with summer homework. This year is no exception, with a fresh bundle of consultations to work through, and more specifically for mutuals, new developments on with profits, Solvency II surveys and the Retail Distribution Review, as well as the continued announcement of new policy from the coalition government. This month’s newsletter gives a flavour of all of these.

Now, notice anything different about Association of Financial Mutuals this month? Hopefully not - he adds hastily to avoid you thinking too hard for an answer - though feedback is of course always welcome. That said the question and response were not entirely rhetorically - over the last few weeks we have been carefully moving across a range of back office support work to new suppliers. The most obvious changes for most will be new phone numbers and shortly our new address, though we have also selected specialist sources of accounting, website management, printing and other services.

This has helped add to the cost effectiveness of AFM, and as a result the Board has been able to maintain membership fees at the same level for 2010/11. Not only that but we have concluded that all networks will be free to members and Associate members wherever possible, and that AFM will take on the cost of further development of our child education website- fun to save- and its soon to be released sister site.

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. AFM Conference

The first AFM conference and AGM will be held at the Merchant Taylors’ Hall, London on 18 and 19 October. The conference promises to be an outstanding mix of thought provoking content and a great chance to keep up to date with what is happening in the mutual world.

The keynote speaker for the conference is the Financial Secretary to the Treasury, Mark Hoban MP. He has long been interested in the mutual world, and is currently presiding over a range of significant policy work, including financial regulation. Furthermore, Ken Hogg Insurance Director at the FSA will also be giving an update on regulatory plans that affect the sector. Amongst many other highlights is the panel discussion on “the future of mutuality” as well as the gala dinner.

Places for the conference are being taken up quickly, so don’t delay in making a reservation. Further details of the conference as well as information on how to reserve a place are available on the dedicated website:

2. Annotated Combined Code/Corporate Governance

With AFM members having completed the Code compliance exercise, I can confirm that once again we have seen very high levels of reported compliance. Early analysis of the results indicates that on average each AFM member was compliant with over 90% of the 20-plus principles. Indeed ignoring the principles that refer to “relations with institutional shareholders”, which are generally not relevant to mutuals, Code compliance has risen to the highest recorded level of 94%. Where an AFM member has not complied with a specific principle, this is explained in their annual report- and again it is reassuring to note that these exceptional cases tend to relate to issues that are not relevant to the way a particular organisation is run.

Shortly we will be providing a link from the AFM website to members’ annual reports, and where possible to the corporate governance statement. For those members that do not publish accounts automatically we are exploring how to provide links to the relevant information about corporate governance. This is all part of our commitment to working with members to achieve high standards of governance and to making governance information accessible. In addition we are supporting Treasury work to explore a single governance code for financial mutuals, and AFM is part of a panel charged with presenting recommendations to Treasury in the autumn on how to deliver high standards across the mutual sector.

3. New AFM Members

At its July meeting the AFM Board approved our first new full member since launch: B&CE Benefit Schemes. We are delighted to welcome them to AFM.

There is an article properly introducing B&CE elsewhere in this month’s newsletter but in short they are the largest supplier of financial services to the construction industry and provide a range of products including stakeholder pensions and accident cover. Yet another example of an AFM member that can justifiably claim to be leading innovation in the UK insurance sector…

We also welcome as Associate members BDO LLP. BDO is the world’s fifth largest accountancy and professional services firm, and in the UK has a dedicated and experienced financial services team of over 100 professionals servicing the breadth of the industry. BDO recently presented to the Board of the AFM and discussed with the Board the types of collective action and individual firm action that are likely to be required to ensure the sector emerges strongly at the end of what may be a period of unprecedented change and challenge. Amongst those issues is with profits, and there is a separate article from BDO in this month’s newsletter.

4. Fun to save

Over 2,000 youngsters are using the fun to save website each month, so it is clearly living up to its name ( and its role of helping young children learn more about money . In July the site achieved the Quality Mark award of pfeg- the government body responsible for helping schools plan and teach financial capability- so we can expect those numbers to grow. In confirming that the website had attained its quality mark, pfeg stated:

“This all works very well and is an excellent resource for KS1 children. It is brightly coloured, the characters and graphics are interesting and engaging. Children choose a character from a choice of four and then proceed to the games. As they play the game, they pick up points when they are successful. They can choose to save these points or spend them on ‘stuff’ like coloured stickers, printable colouring-in sheets, accessories for their characters or desktop wallpaper.”

The teachers’ website, TopicBox, is equally enthusiastic about the website:

“Your games are perfect for integration into lessons - simple, fun and not remotely annoying, even over time! This is perfect for our users, who hate any kind of nonsense in their lessons it seems...”

As a further endorsement of its worth, we have been approached by an organisation in Asia about duplicating the site for the Singapore and Hong Kong markets.

In short, the fun to save website is a valuable demonstration of the commitment of the sector as a whole to financial education, and as a result the AFM Board has concluded that the site should now be made available for all members to promote. This means that all AFM members are welcome to include a link to the site from their own website work on education.

Moreover, as fun to save is focused on Key Stage 1 children, the AFM Board has commissioned a new site targeted at children in the 7 to 11 range (key stage 2). The new site will be ready in the autumn and will further cement the sector’s reputation for helping young people to be better aware of the need in future to take responsibility for their future finances, as well as a better understanding of money matters. In the meantime, here is a quick preview of the new site:


The AFM Communications Committee is developing a full marketing plan to raise awareness of fun to save and to launch the new site. Any members who would like to participate in this should contact .

5. Regulatory Issues

  • Dear CEO letter to Mutuals with a with profits fund

FSA recognise that the period of time between firms responding to the Dear CEO letter and their feedback has been longer than expected. This has been partly because the range of issues has been greater than anticipated, but also because FSA is very keen that there is a consistent approach from within supervisors.

I understand however that FSA is now preparing to write to mutuals, and that this process will start very soon for larger organisations, and be more or less completed by the end of September. At the same time FSA is preparing a further more general communication to the sector.

It would be helpful for organisations to keep AFM in the loop on the issues that emerge from these letters and whether there are specific concerns that we might seek to address on a co-ordinated basis. Likewise, FSA’s recent paper marking its with profits review indicated some areas for improvement in the regime, and AFM is keen to work with members and the FSA on proposals for a consultation later in the year.

  • Retail Distribution Review

There has been some speculation that the FSA Board came close to cancelling or deferring the RDR. That was probably never a realistic expectation, nor would abandoning the work be consistent with the consumer protection objectives of the review, which remain valid.

That said, there are good reasons to suggest that the RDR will have a profound effect on many businesses, and indeed that it will have more of an impact on most AFM members than Solvency II- albeit that the latter is undoubtedly occupying more strategic thinking at present. My sense is that once FSA has communicated the outcomes of its review on mutual with a with profits fund, firms can begin to start plan more confidently for a future where some of today’s products and distribution methods become less viable. There is a separate article in the newsletter on the range of issues to plan for over the next two to three years.

  • Solvency II

The QIS 5 exercise, which will act as a dress rehearsal for firms in preparing for Solvency II proper, kicks off this month, with firms given a limited period to complete the questionnaire.

Indications from AFM members are that almost if not all of those that will need to comply with Solvency II are aiming to undertake QIS 5. This should give the UK mutual sector a strong presence in the results, which will affect the final shape of capital requirements under Solvency II. There has been a lot of talk about proportionality in the final rules, and I would expect the results of QIS 5, as well as the qualitative survey which sits alongside it, to be actively used to explore appropriate simplifications for smaller firms.

FSA has run some workshops recently exploring the general concepts behind QIS 5, and is running more technical workshops in September, designed to help smaller firms complete the QIS 5 spreadsheets.

Non-Directive members will continue to see capital requirements regulated by FSA. The AFM Solvency II working group is now engaged in preliminary discussions with FSA to explore how best to achieve a new regime that is broadly consistent with the requirements of Solvency II, thereby affording consumers similar levels of protection, whilst avoiding overcomplication. FSA will be aiming to consult on their proposals late 2010/ early 2011.

  • Other FSA communications

FSA has recently issued its latest General Insurance and Life Insurance newsletters. These include information on anti-bribery, Solvency II, the with-profits regime review, recent enforcement action, unfair contract terms and the new online system for notifications and applications.

The Online Notifications and Applications web pages provide useful information and firms should seek wherever possible to the system, which provides improved efficiency:

6. Political Issues

  • Diversity in financial services

With momentum gathering on the new government’s political agenda there has been a regular and healthy debate about the future role of mutuals, and in particular whether the public sector can learn from the way mutuals deliver effective standards of service, and engage staff and customers in the running of the business. AFM and its members remain keen to be a part of that debate, and recently wrote to the Chancellor offering suggestions on where we can help.

Elsewhere the Commission on Ownership has had its first meeting. The Commission’s stated objectives highlight the importance of diversity of corporate form at a time when trust in institutions is at a low point and public services need to be more accountable. For more, see:

For a thoughtful overview of these issues, it is worth reading a paper on the Mutuo website, as per the extract and link below:

“Modern mutuality needs to play a bigger part in the efficient and successful delivery of goods and services today. But modern mutuality also needs to be a means to the end of recreating a civic society in which individuals want to take responsibility and control over such matters, rather than handing them over to others to decide on their behalf.”

An early example of the mood in government to make public services more mutual is legislation that enables certain public authorities to establish a mutual insurer to resolve a range of insurance needs. AFM is part of a working group on “Best value authority mutual insurance” which it is hoped will enable authorities to take advantage of the legislation and form new mutual companies and thereby reduce the cost of insurance.

  • Child Trust Fund

The announcement that all government contributions to the Child Trust Fund will cease from 1 January 2011 came as a surprise to a lot of people. The formal announcement however did not state that the CTF wrapper itself would be removed, and the popular opinion amongst providers, child agencies and many academics is that it should remain possible for new parents to set up a Child Trust Fund.

AFM is a member of the “save child savings” alliance and will continue to work with other stakeholders to retain the product, which is a valuable source of new saving and an effective way to accumulate a nest egg for children as they grow up. The alliance website explains more, and includes a petition that I urge you to sign to show support:

Just ahead of the summer recess the Financial Secretary, Mark Hoban invited a range of interested stakeholders, including AFM and its members, to a meeting to discuss child savings in general, but in particular the impact of the announcements on the Child Trust Fund. The Minister was genuinely interested in how a voucherless CTF might continue and we will continue to engage over the coming months.

  • Other public affairs issues

The AFM Regulation Committee has been leading a campaign for some time now to enable friendly societies to take advantage of electronic communications. We are now working with Treasury on a draft Order which they plan to consult on in the early autumn and thereby enable societies to incorporate electronic communications in time for 2011 AGMs, and for a variety of other purposes.

AFM is part sponsoring a series of fringe meetings at the main party conferences this autumn, along with the BSA and Cooperatives UK. The meetings are being arranged by Mutuo, and follow up on the collaborative work of the Mutual Manifesto published ahead of the general election. The fringe meetings will be held in late September/ early October and will be used to launch a report on diversity in financial services being produced by Professor Jonathan Michie of Oxford University.

  • AFM media report, Q2

We expected some media interest in the AFM on its launch, but were pleasantly surprised by the volume and positive nature of coverage in Q1 this year.

The momentum continued through Q2 with national coverage in the Financial Times, Daily Telegraph and Daily Mail, as well as some positive regional and trade coverage. Topics covered amongst 14 articles include the Mutuals Manifesto, changes to the Child Trust Fund, the emergency budget and a profile piece. We have also seen good coverage so far in Q3.

7. AFM events

  • AFM Conference: preparations for the annual conference and AGM are progressing, and full joining instructions will be available soon. In the meantime, please make a note of the dates in your diary: 18 and 19 October. The conference is being held this year at the Merchant Taylors’ Hall in Central London.
  • CFO network: The most recent meeting of the network was held at the offices of NFU Mutual in Stratford on Avon on 1 July, with an agenda including Solvency II, IFRS, Financial Crime, Arrow II and the Mutual Transfers. The next meeting is in planning and is likely to take place in November.
  • COO network: following the most recent and very well-received meeting of the network on 30 April, the incoming Chairman, Graham Trill of Royal London, has issued a survey to attendees to explore how the network can evolve over time. We are planning the next meeting for 10th November, with the results of the survey in mind- further information will follow.
  • Corporate Secretaries/Compliance Officers Network: the first meeting of this network is now set for the afternoon of 23 September in London at the offices of Mazars. Further details will be sent to members that indicated an interest in attending. The agenda is dominated by feedback of issues we received from members, which largely concentrated on corporate governance issues. Further information will follow, but early bookings can be made by e-mailing .
  • Internal Audit Network: the AFM Board has approved the formation of a new Internal Audit network. This will be chaired by Andrew Gold of Mutual One, and we will shortly be canvassing views on relevant topics for the fist meeting.
  • Smaller societies and mutuals committee: the first meeting of this group was held on 26th May; copies of the presentations are available on the AFM website. The next meeting will be held on 18th October as part of the AFM conference.

8. Other events:

You may interested in the following;

  • AMICE, the European mutual insurers’ trade body, is holding a workshop on QIS5 in Brussels on 7 September 2010. Representatives from CEIOPS and the European Commission will also be present, and the focus will be on explaining the different sections of the QIS5 technical specifications: Click here. AMICE has kindly offered free places to members of AFM. If you would like to find out more or attend, click on the registration button in the Solvency II meeting folder on the AMICE website:, or contact before 31 August 2010.
  • The annual Mutuo conference, which gathers all forms of mutual together, is scheduled for 4 November in London. The Mutuals' Forum 2010 will examine what the Government can do for mutuals, and what mutuals must do for themselves. Delegates will have the opportunity to network with other leaders in the mutual sector and to share best practice with colleagues through break-out sessions on subjects as varied as health, regulation and mutual capital in the UK.


    For more information on the work of AFM, visit our websites: for members and all professional contacts. for consumers. for children, parents and teachers.

Please remember our new office number: 0844 879 7863.

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