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Insurers pare losses as FCA outlines charges review
by Daniel Grote on Mar 28, 2014 at 15:25
The FCA is concerned that insurers are exploiting long-standing customers, who are not given the treatment as new clients and are left with high fees and poor service, according to the paper.
The regulator is expected to announce the review on Monday and will consider banning exit fees that can deter customers from switching to another provider. It is honing in on the practice of some insurers to use these closed 'zombie' funds to cover the costs of other areas of their business.
Resolution (RSL.L) a buyer of old life insurers was the hardest hit, leading the fallers on the FTSE 100 with a drop of 36p, or 11.1%, to 284p. Its large closed book business, where it services existing clients but does not take on new ones, means it potentially has the most to lose from the FCA's move. Closed book insures Phoenix (PHNX.L) and Chesnara (CSN.L) were hit similarly hard, dropping 9.5% and 7.3% respectively. Phoenix was down 70p at 667p while Chesnara fell 24p to 667p.
Aviva (AV.L) slumped 27p, or 5.6%, to 457p, while Legal & General (LGEN.L) slid 12p, or 5.6%, to 201p. Standard Life (SL.L) and Prudential (PRU.L) dropped 2.6% and 3.3% to 376p and £12.72 respectively. Old Mutual (OML.L), which has disposed of much of its UK legacy business, dipped a penny, or 0.5%, to 200p.
Also reeling was financial sales group St James's Place (SJP.L), which dropped 24p or 2.8% to 822p.
It is the second time in two weeks that insurers have weighed on the index. Changes to pension rules announced in last week’s Budget that will remove the need for many to buy an annuity caused their shares to dive, although they had recovered some of that ground before today’s dip. Today's news also caps a difficult week in which, as expected, the government confirmed a 0.75% charge cap for workplace pension policies used under its auto-enrolment rules.
Despite the hit to insurers, the FTSE 100 gained 37 points, or 0.6%, to 6,625, with strong performance from the miners amid optimism any Chinese stimulus would hike demand for industrial metals. News agency Xinhua has reported a speech from Chinese premier Li Keqiang, in which he pledged the government had ‘policies in store to counter economic volatility for this year’.
Amongst the rising miners were:
- Glencore (GLEN.L) up 7.3p, or 2.4%, at 314p
- Fresnillo (FRES.L) up 14.5p, or 1.7%, at 852p
- Anglo American (AAL.L) up 26.0p, or 1.7%, at £15.13
- Randgold (RRS.L) up 67.0p, or 1.5%, at £45.53
UK GDP figures published by the Office for National Staistics offered few surprises, with growth in the last quarter of 2013 confirmed at 0.7%, although growth for the whole of 2013 was revised down marginally, from 1.8% to 1.7%.
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Look up the shares
- Resolution Ltd (RSL.L)
- Phoenix Group Holdings (PHNX.L)
- Chesnara PLC (CSN.L)
- Legal & General Group PLC (LGEN.L)
- Standard Life PLC (SL.L)
- Prudential PLC (PRU.L)
- Old Mutual PLC (OML.L)
- St. James's Place PLC (SJP.L)
- Glencore Xstrata PLC (GLEN.L)
- Fresnillo PLC (FRES.L)
- Anglo American PLC (AAL.L)
- Randgold Resources Ltd (RRS.L)
- Aviva PLC (AV.L)
More from us
- What's the damage? City debates outlook for insurers
- ‘Time to put the saver first’: gov’t confirms 0.75% pension charge cap
What others are saying
On the road
on Jul 24, 2014 at 10:59