November 2010

Update from the Chief Executive


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

This newsletter is widely dispersed to AFM members and other interested parties - but do feel free to forward to colleagues, and encourage them to write to to be added to the distribution list.

I’ve reported in the past about our work to move our support arrangements to specialist providers nationally. This has proved very successful; our latest move towards a virtual organisation is to amend our postal address/ HQ, which with immediate effect becomes:

7 Castle Hill, Caistor, Lincolnshire, LN7 6QL

Please amend your records.

The last few weeks seem to have been particularly hectic - with preparations and the running of the AFM’s first conference, party political fringe meetings, almost weekly visits to Treasury, engagement with FSA on with profits, the RDR and various other issues, launch of our new children’s educational website and a host of consultation responses. Thankfully there has also been time for networking, and it’s been a pleasure to meet representatives from nearly all of our members and Associate members, as well as much of the rest of the mutual sector, at one event or another over the last few weeks.

I hope the feeling’s mutual - and if not, then in a broader sense the term “the feeling’s mutual” applies to so much of the environment at the moment- with the political landscape increasingly concluding that the mutual sector should be nurtured and has a greater role to play in society - perhaps that should be “The Big Society”. The articles alongside this bear testimony to this- amongst the trends to discover are how mutuals are growing market share, delivering better customer outcomes, expanding to prepare for new opportunities, and investing in our children’s future.

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

Also in this edition:

• Full report on the AFM Conference

• Launch of the “Saving Squad” website

• Wesleyan gears up for the RDR

• Further evidence of the Mutual Advantage


1. AFM Conference

Around 200 people congregated at the Merchant Taylors’ Hall in Central London for our inaugural conference and Annual General Meeting. A full report is included separately in this edition of Mutually Yours.

Our thanks to everyone who made this year’s conference a resounding success - including to speakers, exhibitors, sponsors, event co-ordinators and of course to all the attendees.

Work has begun planning next year’s conference - look out for more details in future editions.

2. New statistics released on AFM members 

We have gathered together summary statistics from AFM members, showing individual and sector P&L and balance sheets for the year to 31 December 2009.  This is available to view on the AFM website: Click here

The statistics demonstrate that the sector continued to grow assets and premiums in 2009, against a backdrop where the insurance industry in general reported a 15-odd per cent reduction in premiums.  Be that as it may, the business climate remains uncertain, and in particular many AFM members will be affected by the removal of the Child Trust Fund.

At last week’s Mutuo conference, statistics released about the Mutual sector as a whole provide evermore compelling evidence of the importance of mutuals to the UK economy.  A report, “Britain: Made Mutual” shows that in total the mutual sector has some impressive reach (AFM member figures in brackets):

  • 75 million members (20 million of which are in mutual insurers)
  • 1 million employees (14,000)
  • £540 billion assets (£80 billion)
  • £100 million revenue (£6 billion)

(see for more information)

During the Mutuo conference, I made a presentation about “what the world would look like without mutuals”.  As well as these bare statistics, this also explored industry performance, service and innovation.  If you have any suggestions for further evidence of the innovativeness of the mutual sector- in product design, service or community support - I’d love to hear it.

3. AFM's new online training portal

As reported at the AFM Conference, we have been working with e-learning company inmarkets to develop a training portal that AFM members can use for staff training and development.

The development work on the portal is complete, and I hope to issue details on how to use this excellent new resource very soon.  The current version of the portal is a pilot- should this prove successful we plan to roll out more training programmes that members can use free of charge.

4. Regulatory Issues

  • Dear CEO letter to Mutuals with a with profits fund

In September a few large mutuals received a follow up letter from FSA to their response to the original Dear CEO letter. Most AFM members are still awaiting a response, and by the time all have arrived it will be a full 12 months since firms first replied to the FSA. FSA explains that the delay reflects the importance of the subject and the complexity of individual cases- which is precisely what we said to them when they gave firms just 8 weeks to provide a response. The number of firms that are reporting the difficulty that this is causing in long-term planning has therefore increased.

The AFM Board discussed the situation at their October meeting, and continues to be frustrated by these delays, but also at general thrust of FSA’s argument, which remains largely unchanged since last year. Indeed whilst the second Dear CEO letter highlighted that the exercise has done much to reinforce understanding of the diversity of the sector, there is no evidence that this has changed FSA’s general position.

We will therefore persist with efforts to achieve an active and effective engagement with FSA on the issue, but are continuing to review other options. In particular we have recently had a meeting with the Financial Secretary to the Treasury, to explain the severe consequences of FSA’s current position.  I wil report further on this in due course.

On the broader with profits front, FSA is due to publish a consultation paper before the end of the year, taking account of its recent with profits review.  Some AFM members have been invited to a workshop organised by the smaller insurers team.

  • Retail Distribution Review

FSA is planning a further consultation on issues within the RDR early next year, and there remain a whole host of items that seek clarity.  The timetable is now becoming very tight for providers and advisers to achieve all the likely requirements.

On the positive front, we are continuing to talk to FSA about where Holloway income protection sits within the RDR.  These products are principally sold as protection contracts, with the potential for return of excess premiums, and FSA has agreed that there may be some scope for certain contracts to sit outside the RDR regime.

  • Solvency II

The QIS 5 exercise is now complete/ coming to an end. In other parts of Europe we have seen high anxiety amongst mutual insurers that this will have an enormous impact on capital requirements. Such calls have been more muted in the UK, in part because high levels of capital have been held historically, and because the ICA (Individual Capital Assessment) regime has already put a greater onus on capital and risk management in the UK.

Results from QIS 5 should do much to finalise the regime- though it is possible further data exercises will be run. We hope in particular to see evidence in the review of the exercise that it has lead to a greater understanding of the actions need to ensure the new regime is proportionate. We are keen to work with FSA on this and would also hope this translates through to a new regime for non-Directives.

5. Political Issues

  • Diversity in financial services

As previously reported, the recent report by Professor Michie of Oxford University has been well received.  It was encouraging to hear the Post Office Minister, Ed Davey, talk enthusiastically about it at the Mutuo conference last week, and in the context of the work he is leading to explore the possibility of converting the Post Office to a mutual governance structure. 

A full copy of the report is available on the AFM website: Click here

The AFM Board is encouraged by this and is currently exploring new research work on “Mutual Insurance and the Big Society” to explore how the sector can support some of the coalition government’s policy initiatives.  I’ll report more on this in the next edition.

  • Junior ISAs

During a parliamentary debate on the Bill being introduced to cease government payments to the Child Trust Fund and cancel the Saving Gateway, the Financial Secretary to the Treasury indicated that a new child savings account would be introduced in 2011. This is currently being referred to as the Junior ISA.

AFM was invited to provide evidence to the Bill Committee that is reviewing the purpose and effect of the Bill, and at the evidence session I was able to draw on compelling evidence of the uptake of the CTF amongst friendly societies.

A Treasury convened working group is exploring the components of the proposed Junior ISA (this is a working title only), and again AFM is well-represented.  With the strong pedigree mutuals have established in the Child Trust Fund this may be of interest to a wide group of members, though much as was the case with the introduction of CTFs, big banks and fund managers are expressing interest in the potential of the new product- even though they largely abandoned it on launch. 

It is to be hoped that this renewed interest is based on a genuine interest in growing the market for child savings, rather than a cynical attempt to use the new product as a new opportunity for wealthy clients to shield more savings from tax, or to swoop on the sizeable balances now held within the CTF.

6. AFM events

  • CFO network: The network will meet on 24 November at the offices of NFU Mutual in Stratford-upon-Avon. Items on the agenda are likely to include…
  • COO network: the network met on 10th November, at Royal London’s offices in Wilmslow. Another stimulating series of discussions ensued, with topics including Information Security, Solvency II, regulatory issues and risk management.
  • Corporate Secretaries/Compliance Officers Network: the first meeting of this network took place on 23 September in London at the offices of Mazars.  The main area that attendees wished to discuss was corporate governance and a full programme produced plenty of food for thought.
  • Internal Audit Network: the first meeting of the new Internal Audit network will take place on 1 December at the offices of Mutual One in Leicester.  There has been good interest in the meeting, to be chaired by Andrew Gold of Mutual One, and a full agenda will be issued soon.
  • Smaller societies and mutuals Forum: the next meeting of this forum is likely to be in late January/ early February.  Suggestions for content are welcome and more details will be issued soon.
    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 8 to 11 year olds, their parents and teachers

Please remember our new office number: 0844 879 7863.

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