Are insurers the City's new fat cats?

Soaring executive pay packages have investors asking if they are really getting the best deal, writes Jamie Dunkley

RSA Insurance prides itself in being predictable, profitable and about as conservative as a group from the Women's Institute eating cucumber sandwiches in a leafy suburb somewhere in Surrey.

Under the stewardship of its former chief executive, Andy Haste, the company recovered from a near-death experience in the years shortly after the millennium to become one of Britain's most respected financial institutions. Dividends and profits both seemed to go only one way and even the onset of the financial crisis didn't seem to check its progress.

But in recent months the mood of investors has darkened following a controversial dividend cut at the beginning of the year. RSA blamed falling investment returns for the move at its AGM in London last week although shareholders called for the company to take a punt on riskier assets such as equities.

Even Standard Life waded into the row, revealing in front of a packed audience in the City at its annual meeting that it was "surprised and disappointed" by the cut. "Excessive prudence was brought to bear," said Guy Jubb, head of corporate governance at Standard Life.

This unexpected public outburst by a fellow insurer summed up a period in which the industry has found itself under the spotlight for many of the wrong reasons. RSA is by no means an isolated case. Aviva's shareholders have demanded urgent action to improve both its profits and share price, while Prudential continues to be haunted by its botched $35.5bn (£23.6bn) takeover of AIA back in 2010.

These attacks have led to some investors to question the amount of pay being paid to executives across the sector. With pay amongst the highest in the business world, are insurers the new fat cats?

One leading institutional investor said: "If you look at the performance of the insurance industry over the past few years it has been good. We shouldn't be surprised to see that companies are paying well.

"However, shareholders need to pay closer attention to what long-term incentives pay out in good circumstances. I don't think people always appreciate what they are signing up to and this should become clearer next year when companies begin setting out both target long-term incentives and the maximum incentives available."

For others though, the backlash against insurers does not mean they are about to replace the banking industry as the whipping boys of the financial services sector. George Dallas, head of corporate governance at F&C Asset Management, said: "The controversy in financial services is more about banks and we feel that sector needs more focus, particularly given lingering effects of the financial crisis and more recent reputational issues that have come to light relating to product mis-selling and other compliance failures. We have had fewer concerns with the insurance sector."

Insurers will be left to reflect on a stormy few weeks, but what seems clear is that any company seen to be stepping out of line will feel the wrath of investors.

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Admin Assistant

£12000 - £15000 per annum: Recruitment Genius: An expanding Insurance Brokerag...

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders