Since the early days of the international life industry, David Healy, managing director of Aegon Scottish Equitable International, has seen steady growth. Keren Holland finds out how he sees its future
The international life industry has outgrown the term offshore, according to David Healy, managing director of Aegon Scottish Equitable International. In fact, if he had his way, the term would be abandoned altogether.
Healy believes the word does no favours to providers and advisers offering cross border life products for genuine and legitimate tax planning purposes and says this was reinforced recently when HM Revenue & Customs in the UK increased its focus on offshore bank accounts. He explains: "Just the very word offshore does not help us, at the moment we have got the situation with offshore bank accounts where there is now a tax amnesty. But what people are doing there is tax evasion, whereas what we do is genuine tax planning. In some ways, the word offshore is a moniker that we can probably shake. Cross border tax planning would be a better term but old habits die hard."
Healy has been involved in the international life industry since the early 1990s, when he joined J. Rothschild International - the first life company to set up in Dublin's financial services centre. European Life Directives had been implemented, and no one knew how the cross border market was going to grow. Healy says: "There were all these European opportunities but there were also opportunities in the Far East, the Middle East and South America - it was really very eclectic back then. I had grown up in the domestic insurance industry in Ireland, working for some of the big domestic players, and suddenly to get into the international stage was very exciting. It was very vibrant and quite fast paced."
Healy remained with J. Rothschild International until Aegon decided to set up Scottish Equitable International in Luxembourg in 1995. Having been part of the set-up team, he was promoted to his current role as managing director two years later.
But it eventually became apparent that the company would have to consider relocating in order to keep up with the competitive market. He says: "We had five reasonably successful years in Luxembourg, selling back to the UK but also pursuing other avenues of distribution in Europe and beyond. But our whole market was always about selling back into the UK. One of the difficulties we had in Luxembourg was it has quite a prescribed regulatory environment, different from the Isle of Man and Dublin for instance, which is very much principles based regulation. We were at a major disadvantage to the companies that were in the Isle of Man or Dublin, particularly with regard to the UK."
As a result, it was decided the company would relocate to Dublin, with its more beneficial corporate tax rate, and access to good quality staff. Healy says: "Dublin is very business friendly without being a light touch and it allows us to be innovative and to try to be at the front end of developing new products. So we moved over in 2002, and we have had fantastic growth since then, the move was really the right thing for us to do. At the same time, we focused our efforts almost exclusively on the UK so we are a little bit different from most of the competitors out there who still do a lot of business in Europe or elsewhere. It is quite a focused approach but it has served us very well."
Healy is proud of Aegon Scottish Equitable's approach and frequently uses the word 'innovative' to describe it. The most recent example is the launch of its variable annuity product 5 for Life, which offers investors a guaranteed income of 5% of invested capital from the age of 60 for the rest of the policyholder's life. In creating the product, it used the expertise of its parent company in the US, where variable annuities are common.
While Healy admits marketing a product which is not well known in the UK is difficult, he also believes providers should be striving to bring innovation to the industry. He says: "When you do something new people are trying to understand it, trying to look for the holes in it, and trying to see if there is value there - particularly when you are selling some sort of guarantee which is what we are doing with 5 for Life.
"So we have got a challenge to educate IFAs and to convince them of the value in the proposition. We are very comfortable with that, we think it is a real value proposition, and we are making good progress with IFAs, but it will be slow."
Healy believes variable annuities will become more popular as big players, such as the Hartford and MetLife, launch similar products. He says: "If credibility is needed, it certainly gives credibility, but also helps spread the message. At the moment competitors in the UK are competing in the same space, they are either fighting over group pensions, or individual pensions, or bonds. The variable annuity sits right in between, it is not a full annuity, it is not a pure investment product, it is a whole new concept for many investors. We think it will be very big and people will buy into it. I think some of the bank channels will find it appealing to their base, so maybe distributing through some of the banks could be a way of growing that market as well, so there is a lot to go for."
Healy is clearly excited by the recent growth in the offshore market, and believes there is still plenty of potential in the UK. He explains: "It's actually closing in on the onshore market which is great. And still not even half, maybe only a quarter, of UK IFAs actively sell offshore product, so the growth opportunity in the UK is still huge."
But while Healy predicts a bright future for the international life industry, he warns there will be some issues to overcome. He adds: "One of the challenges is to maintain good customer service, good quality staffing, proper infrastructure and ongoing training of salespeople. That has been where some of our success has been-- we have trained out back office people very well, but our sales people are trained equally well so when our consultants are out there working with IFAs, they know what they are talking about and that is important. I see that as a challenge for the industry." n
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