It is almost ten years since the Utmost Group was formed and six years since it gained a major foothold in the international life assurance market with the purchase of AXA Isle of Man from AXA in October 2016.
Since then, following a number of acquisitions, Utmost Wealth Solutions has grown to become a market leader with almost £5bn of new business flows each year. Its assets under administration have also increased, from around £9bn in 2016 to c. £56bn in 2021.
Stephen Atkinson (pictured below) is Utmost Wealth Solutions' global head of sales and marketing. He has played a leading role in Utmost's acquisition programme and in positioning the business as a leader in the international life market over the long-term. Stephen has over 40 years' experience in financial services with 25 years spent in the international market.
In this first part of a two-part interview, Stephen speaks to II's Mark Battersby about the experiences that Utmost has gone through over the last five years and gives his views on what's important in the international life assurance market going forward.
MB: You've been involved in several acquisitions in this market sector in the last five years. Can advisers learn anything from the insight you've gained along the way?
SA: Buying a number of international life companies over the past few years has given us a unique insight into the industry. We have learned many lessons that can be helpful for advisers, particularly if they're able to combine this with the vast amount of information that is in the public domain.
MB: What would you say was the number one lesson for advisers?
SA: My wife's favourite book is Pride and Prejudice, and whilst there aren't many parallels with the story of life assurance, what does strike me is that advisers should choose an international life company in the same way as Victorian parents would have selected a husband for their daughter, making sure that he had the real financial means to provide strong support for life!
Very simply, is it important to select the strongest international life company for your clients. Investing in an offshore bond is one of the most important decisions that an adviser will make on behalf of a client as the commitment is for 15 to 20 years and possibly longer for multi-generational planning.
If you want a company that will be around to service you and your clients - and provide the functionality promised at the point of sale for the long term - the life company must have the size, financial strength and strategic intent to be in it for the long haul. Among other benefits, this will ensure that the company has the economies of scale to be able to cope with and adapt to ever increasing regulatory and technology costs.
Clients and advisers need a solution that's built to last, with long term reliability. We are convinced that the future belongs to strong, well capitalised large companies.
MB: And what do you mean by "strong"?
SA: Advisers will be aware that the financial strength of a life assurance company can be measured in three important ways.
Firstly, there is the Solvency Margin which can be found in a company's annual SFCR. This requires a little analysis if it's to be used to paint a true picture. A high level of Solvency Margin may not necessarily be better than a low one, but all things being equal, the actual rate is a pretty good proxy for financial strength. However, particular attention should be paid to the constituent parts of the Solvency Margin such as the use of intangibles like the value of the life company's in-force book or VIF.
Simply put, VIF is money that doesn't yet exist, compared with existing assets that are available and have a net asset value or NAV. Whilst there is no definitive answer, advisers need to be sure that companies are maintaining the appropriate mix of assets for their business.
Secondly, advisers need to look at the company's Balance Sheet strength. Again, a summary can be obtained from the company's SFCR and annual reports, and then the key indicator to look out for is gearing or leverage. A high and increasing level of debt will probably indicate potentially adverse financial issues and in times of increasing interest rates this may be of increased concern.
Thirdly, the company's Profit and Loss account. To state the obvious, it's important that the life company is generating sufficient income to generate a profit to provide a return to shareholders and, importantly, to reinvest in the business. Some of the details to consider here include whether or not the income is diversified across different markets and products, and the nature of the income as a higher percentage of recurring income provides the company with a far stronger base.
MB: Are external/independent ratings important? What role should they play in an adviser's assessment?
SA: Credit ratings are a very useful tool for advisers, but as we saw during the global financial crisis, care is needed as not all rating agencies are the same. Generally, a rating from one of the top three agencies, Fitch Ratings, S&P and Moody's are considered to be in the top tier, something that may also help if lending is required against the policy.
MB: It sounds like size and financial strength is the ‘be-all and end-all'. Are there any other factors that advisers should consider to be very important?
SA: There's no doubt that long-term stability and economies of scale highlight the need for advisers to focus on large well capitalised companies.
But all of this counts for nothing if the strategic intent to build the business is not in place.
What do I mean by ‘strategic intent'? Well, Utmost can draw on the lessons we've learned in acquiring life assurance companies.
I could list many different factors but, without doubt, the single most important point is that, in virtually all cases, the companies we have acquired, mainly from large insurers where they were regarded as non-core, were often starved of resource and in some cases stripped of capital to support other parts of their parent group in the 3-5 years prior to their sale.
From the outside, this may not have been evident to advisers - good sales and marketing skills can paint a very different picture to the reality and gloss over what is really going on!
We also find that when we've taken over a company and offer a more positive future to its management and employees, perhaps not surprisingly this has a major impact on the business. Undoubtedly, the management are aware of all the issues and, more importantly, following years of working in a different environment, they are keen to be part of a thriving business and put many of their own ideas into action. Investment in your people is the key to success.
MB: What are your investment plans for the business over the next few years?
SA: We have a clear focus on international life assurance as our core business. We want to grow organically by investing in aspects of our business such as a substantial IT programme costing over £40m to improve functionality for advisers and clients. We're also looking to increase our global technical team to meet the ever-increasing demand from advisers and clients and respond to continual regulatory changes. Finally, time doesn't stand still and we're looking to relaunch and redesign a number of our current products to meet changing client needs and keep ahead of the market.
I'm undoubtedly biased but I think that Utmost is the best placed international insurer in terms of having the strength to invest and, just as importantly, the strategic intent to build our business.
We'll look to maintain our financial strength, of course. Our A (Strong) Fitch Rating means we're the highest rated independent international insurance company. Our group Solvency Margin is one of the highest in the industry at 177% as is our assets under administration of £56bn. We have a diversified income stream across 14 markets, reducing the risk to the business, and a high level of recurring income which means that the business is self-sustaining.
As with adviser businesses, we're looking to remain profitable and dividend paying, providing a balance between building the business and rewarding staff and shareholders.
