Engage cashes in on lack of faith in banking

The Harrogate-based financial services firm, which sponsors Super League Rugby, also said it increased the customer base to nearly 470,000 in 2010.

The chief executive warned, however, that consumers would be hit hard this year as the full force of coalition austerity measures is felt.

Andrew Haigh, chief executive, said: “The thing that effects our business is consumer confidence. That will get worse before it gets better because we will see the impact of cuts on people’s disposable income.”

Accounts published today show Engage increased customer numbers for the 13th consecutive year as well as cutting costs.

The firm, which provides life insurance, savings, investments, and health cash plans, added 7,000 customers through organic growth and 22,000 through last year’s acquisitions. Provincial Hospital Services Association, based in Bedford, brought 7,000 customers and the deal for part of the long term insurance business of Gloucester-based Ecclesiastical Life added 15,000 customers.

Assets under management rose about £322m (52 per cent) to £946m, with £270m coming from the acquisition of Ecclesiastical Life and £5m from PHSA, as well as £52m from organic growth. Acquisition costs were about £5m.

The mutual also paid out more than £75m in life insurance claims, healthcare benefits and maturing savings and investments. The health business also achieved its first operating profit.

The fund for future appropriations – a friendly society’s equivalent of profit performance – rose to £36m, up from £5m.

The improved performance included £5m from acquisitions, driven by PHSA, £7m of underlying surplus and £24m of one-off benefits from the Ecclesiastical Life deal.

Engage, which has 190 staff, said total expenses rose to £19m because of one-off costs related to the acquisitions and a different accounting method for an improved re-insurance contract.

Mr Haigh’s salary, bonus and pension contributions rose to £317,000, up from £313,000.

He said: “Engage Mutual had a solid foundation, but the fruition of our recent strategy provides further strength and security to support the organisation going forward.”

Mr Haigh said the mutual would continue to grow this year but would be limited by the health of the wider economy.

“It is an extremely challenging environment... While I see the current challenging environment continuing for the present, with a growing impact of spending cuts on consumer confidence, I would also add that the double dip scenario remains a real possibility.

“We believe our cautious approach of careful cost control, while building on the successful acquisitions from 2010 and a focus on efficient marketing activity to deliver steady organic growth in key areas of long-term savings, life protection and health gives us a solid foundation under either eventuality.”

Engage, which last week appointed Andrew Gosling, former finance director at Yorkshire Building Society, as a non-executive director, has expanded rapidly. It merged with the UK Civil Service Benefit Society and bought health plan business Premier Health Benefits. Mr Haigh said the financial crisis had created an opportunity for alternative financial providers.

“Following the events of recent years there has been a significant loss of consumer confidence in certain parts of the financial services industry.

“From the feedback we receive we know that people are increasingly positive about dealing with us as a mutual organisation because we are owned by, and run for, the benefit of our customers. It is a simple proposition that seems particularly relevant in this economic climate. However, just being a mutual doesn’t guarantee success and we certainly can’t be complacent.”

The friendly organisation

Engage Mutual was established as the Homeowners’ Friendly Society in 1980. The organisation was rebranded as Engage Mutual Assurance in 2005, which through itself or one of its subsidiaries, provides child trust funds, health cash plans, tax exempt savings plans, single premium investment bonds and over 50s life insurance.

Last year it revealed the acquisition of PHSA, in November, and a deal to transfer part of the long term insurance business of Ecclesiastical Life, in August. Ecclesiastical Life was part of the Ecclesiastical Group, which provides financial services.