[Weekly wrap] Life insurance confusion

This week saw questions raised about life insurance statistics that don't include the whole industry; also, a fund manager feud ended and new data gave mixed signals for the mortgage market.

Friday, March 9th 2012, 9:26AM

by Niko Kloeten

The thorny question about the usefulness of ISI figures that only account for about 80% of the industry, and don't include newcomer Partners Life, popped up not once but twice this week.

On both stories reader comments questioned what conclusions could be drawn from figures that don't take account for the rapidly-growing newcomer, a problem ISI chief executive Peter Neilson acknowledged.

"If anybody (not an ISI member) has grown sales more rapidly than our membership group, it wouldn't show up in our figures," he said.

This issue needs to be sorted, as it is important to be able to have a clear and accurate picture of how the industry is performing, particularly given the well-known issues associated with it such as under-insurance and the dreaded "churn" word.

Meanwhile, the court battle between Brook Asset Management and Devon Funds Management came to a close after the two parties settled.

The case involved staff being "poached" from Brook by Devon, which is run by former Brook co-owner Paul Glass. While court cases are rare, competition between managers for top talent is said to be heating up. And despite what critics say, New Zealand fund managers stack up well internationally.

One area where New Zealand doesn't stack up so well is performance fees, as Harbour Asset Management found out. After changing its own fee structure following criticism by fund researchers, Harbour called on other fund managers to also change their ways.

This week also saw a lot of news in the home loan market, which did little overall to provide a clear picture of where the market is heading. The sluggish market has prompted lenders to loosen their lending standards.

And although mortgage applications have topped pre-GFC/recession levels, mortgage approvals are nowhere near where they were during the boom.

The good news for the market is that floating rates are unlikely to rise this year with the OCR looking to be on hold for most of the year. And rising funding costs don't appear to be hurting the banks.

The banks may be doing fine, but printing company Blue Star Group is struggling, and looks like it might breach its banking covenants.

And finally, the government this week announced it plans to sell SOE Mighty River Power later in the year, but financial advisers aren't jumping for joy at the big IPO.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

« Performance fee critic's fees found wanting

Managers warn against more KiwiSaver regulation »

Special Offers