Prudential recently announced their 2011 Q1 figures, which look impressive. Their global profit is up over the same period a year ago from £427m to £498m a £71m increase or nearly 17%. This at a time when pensions have been struggling, markets have had a hard time and generally the world might be described as “uncertain”. This is of course, precisely what insurance companies thrive upon – uncertainty and perhaps rightly so. I have a high regard for Prudential who struggle to make the transition from traditional insurance company to that of … well there’s the dilemma. The insurance world is somewhat betwixt and between. Insurance has probably “never been needed more” than in 2011 yet traditional ways to manage money and investments is evolving rapidly to reflect a more cut and thrust short-termism world order, where fund managers are paid on results to outperform (and not many do). The rise of the fund supermarket or wrap or whatever you want to call it has meant that traditional pensions are somewhat lagging behind… and who in their right mind would buy the most traditional form of saving – and endowment?
You might be forgiven for thinking… so what! insurance companies rip everyone off… well perhaps some have and indeed the way charges are structured would make you wonder, but we need a good insurance industry, one that is competitive and well resourced. There is a degree to which the net inflows of money to the industry as a whole is alarming, for the last 4 years there have been net outflows (more out than in). According to the most recent 2010 ABI publication (reflecting 2009 statistics) the amount paid into pensions and life assurance products amounted to £119bn (9% less than in 2008) whereas payments to policyholders were £153bn. This cannot go on and underlines the main problem that Britain isn’t saving enough and probably cannot afford to do so. So well done Prudential on a good set of results, let’s hope that some of the profit is passed back to policyholders and not just the shareholders.
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