Broker profits up in first quarter 2011, survey shows

Brokers have reported an accelerated increase in profitability during the first quarter of 2011, according to a heavyweight new report on the financial services sector.

The latest quarterly CBI/PwC Financial Services Survey, published today, shows that insurance brokers further increased their profitability during the first three months of 2011, and at a faster rate than over the previous six months.

Profitability has now grown in each of the past three quarters, according to the sector snapshot, as has brokers’ bullishness about investing more in the year ahead on IT systems and marketing expenditure.

Insurers reported moderate growth in business volumes, spread well across all four customer categories, which combined with maintained stable costs meant moderately increased profitability in line with last quarter’s prediction.

PwC UK insurance leader Mark Stephen said: “Encouraged by increasing business volumes and profitability, general insurers are looking to invest again in staff, marketing and IT. Reaching new customers will be vital to general insurers’ growth plans and companies are investing heavily to attract new business.

“Cost drivers are mixed. Regulatory spend is increasing as insurers gear up for Solvency II implementation. While headcount is on the up, insurers are struggling to recruit the skilled managerial staff they were hoping to bring on board.

“The continued low growth rates and intense competition in the UK market is forcing insurers to explore new growth avenues and continue to push for new international business. The coming quarter will look quite different as the impact of this quarter’s natural disasters is felt.”

Across the financial services as a whole, the PwC/CBI survey showed that 33% of firms reported increased business volumes, while 11% said they fell.

CBI chief economic adviser Ian McCafferty said: “A third quarter of strong volume growth shows the financial services recovery is building strength. It is particularly good news that firms consider their level of business to be only slightly below normal, for the first time since the financial crisis began in 2007.