I worked for Zurich one way or another much of my life; I know them to be a decent European general insurer who know quite a lot about investing in UK life and pension businesses. Allied Dunbar , Eagle Star, Dunbar Bank , even the concept of Zurich Financial Services have been packed away with mothballs. Zurich started in 1872 as a reinsurance company and is now an insurer around the world. It does not write annuity business.
Zurich has messed with hedge funds and private equity but appears to be in a good position to say to the FT today
Life insurance is a ‘medium- to long-term business, and private equity is a short- to medium-term business’
It would be good to feel these sentiments from Mario Greco extended to the UK
“I’m not sure that the same asset-gathering philosophy that they’ve had in the US can work in Europe,”
“They’ve been growing in markets where regulatory controls were lighter than in Europe,” he said, but “so far in Europe, they have not grown as they did in the US”.
But Britain is not sentimental
Apollo-backed insurer Athora in July announced a £5.7bn deal for a UK retirement savings group. People familiar with the deal said the move reflected a change in strategy after Athora struggled to expand in Europe.
Weeks later, Canadian alternative investments giant Brookfield said it had struck a £2.4bn agreement to acquire London-listed life insurer Just Group.
It’s a case for our insurers of taking the money and let the members make the most of it. Here’s Zurich’s CEO again
There must be alignment, because customers buy life solutions often for the long term, and they don’t like to hear that there is a change in ownership of their liabilities.”
I am a Zurich Pensioner, I am in a well funded pension with a surplus that may be up for grabs in the not too distant future. I am glad that there is a man in Zurich who recognises that I count as a stakeholder in the payment of my pension.
Apollo’s boss Marc Rowan said on an investor call in October that regulators had hampered its growth ambitions in the European market.
“Regulators have two choices as to where . . . capital comes from, the banking system or the investor marketplace. Everywhere, they’ve told the banks to do less. It’s just in Europe they forgot to tell investors to do more,”
As a pensioner , a pensioner of Zurich insurance, I would beg to differ. The money paying my pension does not come from banks or investors, it comes from the pay packets of workers and from the sponsors of their pensions – their employers.
This attitude of American private equity houses to the pensioners and to be pensioners of the pension schemes they take over shows how little they care for the pensions they pay.
This point has been made many times on here, most recently by Jnamdoc, complaining at the failure to consider the futures of pensioners. This is not just about DB , it is about the defaulters in DC pensions – the vast majority of pensions who want a good pension from their employment, from their employer and from their trustees.
It is disappointing that Rachel Reeves has welcomed Brookfield to Just but I wonder if she’s had to worry about pensions from a personal point of view.
Reeves should speak with Mario Greco and the European Regulators as to why they’re unhappy to see ownership of pensions passing to financiers with short timeframes for profit.
I don’t have a lot of knowledge about the insurance industry and its regulation, but I do wonder why it appears not to be regulated in the same way employer sponsored DB pension schemes are regulated – namely against the fundamental assumption that the sponsor will fail!
While Equitable Life was a mutual, it did expose the fact that an insurer could fail at cost to the taxpayer. Could we need a need an insurance equivalent of a Financial Assistance Scheme?
We therefore have to question whether the FSCS would be able to protect the policyholders if a private capital owned insurer was to fail. Would the other FSCS participants be prepared to assume its liabilities in return for a proportionate share of the deficient assets? Could that in turn trigger a systematic risk?
Perhaps we need a Regulator whose first legal duty is to protect the FSCS!
So as a nation we need to question why insurers are not being assessed in the same way as DB funds – are the dedicated assets sufficient to meet the current estimate of the future liabilities. Is the sponsor assessed on its capacity to provide sufficient additional assets to fully fund over a limited time period and legally required to make deficit payments? Are weaker sponsors required to build the ring fenced dedicated assets to a fully funded level over a shorter period than those more able to make the payments, requiring them to raise additional capital, sell other assets, and forego dividends until the position is rectified?
Would UK insurers still be attractive to private equity investors on this basis?
As another issue, should pension funds invest in private equity vehicles that themselves invest in pension products?
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