Strong growth in financial services activity

Activity grew strongly in the UK financial services sector for the second quarter in a row, a new survey reveals today.

However, in the three months to December 2010 profitability did not increase as fast as expected, growing at the slowest pace for 18 months, and numbers employed in the sector fell at the fastest pace for 17 years, according to the latest CBI/PricewaterhouseCoopers (PwC) Financial Services Survey.

For life insurers, both business volumes and profitability rose for the fourth consecutive quarter, although optimism among life insurers fell for the first time since March 2009, possibly because of falls in income from fees & commissions, and a lack of growth in net interest/trading income.

PwC’s London market insurance leader, Gavin Phillips, comments: “While volumes of business are still reported to be climbing, the value of new business has disappointed.”

He adds: “The sector’s ability to raise capital is a major concern and marketing budgets for 2011 appear to have been slashed.”

In additional, life insurers are expected to cut further jobs over the next three months.

Meanwhile, general insurers reported the fastest growth in business in five quarters, although this was offset by a sharp fall in net interest, investment & trading income and no change in spreads, meaning that profitability overall fell on the previous quarter.

For general insurers, Mr Phillips describes the outlook as “uncertain” with intense competition, rising claims values and declining investment returns putting pressure on profitability.

Finally, optimism among insurance brokers rose at its fastest rate in a year during the period of the survey.

Firms reported a further strengthening in business growth and a rise in income values.

Growth in profitability was “robust”, although this looks set to contract in the next three months, with incomes expected to fall and business volumes predicted to be broadly flat.

Tags: activity, brokers, CBI, December 2010, general, PricewaterhouseCoopers, profitability, PwC, survey, UK financial services, volumes

Category: Employment News, Financials, Insurance News, Life Insurance News