CPP, the troubled credit card insurer, is planning to shed hundreds of staff – including its chief executive and finance director, who have said they will leave as soon as the company’s future is secured.

The York-based insurer has been fighting for its life ever since it was handed a record £10m fine for mis-selling credit card protection products by the Financial Services Authority. But CPP faces a total bill of £51.7m, once customer compensation and its legal and investigation costs are included.

Its survival now rests on a bank refinancing and a potential takeover bid from its founder and largest shareholder Hamish McGregor Ogston, who would take the company private. Mr Ogston has until the end of the month to make a formal offer but has set out a number of conditions to be met.

Paul Stobart, chief executive, and Shaun Parker, chief financial officer, said they would step down as soon as the “transition is completed”. The company said on Thursday it had started consultations with its 1,200 UK staff over plans to cut overheads by a third.

CPP said revenues had fallen 25 per cent in its first quarter and it made an operating loss partly as the result of the loss of a contract for mobile phone insurance from RBS. It recently sold its US business for a bargain price of £26.1m.

Mr Stobart, who joined CPP six months after the regulator’s investigation began, said the business was shrinking and that it was appropriate for him to step down from the company. “We’re taking out a lot of cost and I know that my own cost is part of that,” he said.

The company said renewal rates for its traditional card and identity protection products were at around 70 per cent and it still has 4m customers.

Mr Stobart, who earned £450,000 a year, is widely credited with having overhauled customer service and winning the confidence of staff. He also developed plans to refocus the business away from insurance and towards mobile and digital services such as protecting data on mobile phones so that confidential emails and photos are deleted if they are stolen.

But the need to focus on the company’s survival meant many products hadn’t yet come to market, Mr Stobart said.

Mr Ogston, who launched the company with £1,000 in 1980, has indicated that he may offer to buy it for 1p a share or £1.7m, depending on certain conditions, including new, three-year credit arrangements with banks. Last year a proposed offer from US group Affinion was withdrawn.

Further evidence that UK-listed companies were avoiding a repeat of last year’s shareholder rebellions came on Thursday, when two FTSE 100 insurance groups encountered only minor dissent over executive pay.

Shareholders in Prudential backed plans to grant Tidjane Thiam, chief executive, a total package of £7.8m, up two-thirds on a year earlier.

Some private shareholders at the Pru’s annual meeting criticised the awards, in light of the Pru’s recent £30m fine for its mishandled bid for Asian rival AIA.

Overall, though, little more than one-in-nine shareholders voted against the pay plans. This compares with a 30 per cent revolt a year ago.

Paul Manduca, Pru chairman, said he recognised that directors’ pay was high but argued that it reflected strong performance, which has pushed the company’s shares to record highs.

A similar proportion of shareholders in Resolution – the life insurer founded by entrepreneur Clive Cowdery – voted against directors’ remuneration.

The Financial Conduct Authority (FCA) is being urged to launch an immediate review of the fast-growing direct sale annuity market amid concerns consumers may be unaware of the costs involved or their statutory rights.

The influential Financial Services Consumer Panel made the call as a flurry of “execution-only” online services has launched in recent months to take advantage of the growing appetite for do it yourself investing.

Execution-only services offer a new option for those approaching retirement being encouraged more than ever to shop around for their pension income, and not settle for the annuity rate offered by their savings provider.

But the panel, appointed by the FCA to advise on policy, is concerned that “non-advice” sites, which charge commission and not upfront fees, are not required to be sufficiently transparent about their operations.

“By ‘non-advice’ I mean the annuity websites that offer a great deal of information for ‘free’ and help guide customers to the right decision, but nevertheless, under the regulation, are execution-only,” said Debbie Harrison, who is a panel member and also senior visiting fellow of the Pensions Institute at Cass Business School.

“This means that they are commission-based. People want to go DIY to save money, but in some cases commission can be 3 per cent or higher, so they may pay more than had they got advice. And they won’t find out about this commission which comes off their pension fund, until they are well into the online sales process,” she told the Financial Times.

Harrison said there are some good execution-only websites, but others appear to have “poor or even deliberately misleading messaging” and do not explain the implications of this type of advice in relation to the cost, payment form, and regulatory protections.

“Some of these sites look like advice, and take you through a process which feels like advice,” she said.

“The panel would like to see greater clarity in the regulation of such sites. They should be required to prominently display on the homepage that this is an execution-only service. They should explain this means commission is paid, which in some cases, might be as much as paying for full advice. The lack of recourse to the Ombudsman should also be explained.”

The FCA has committed to considering the potential risk to consumers from non-advised sales of all products, which have proliferated since advisers were banned from taking commission on new business from product providers. They now charge upfront fees instead.

“Annuities are not like car or home insurance,” Harrison said. “They are complex, one-off purchases which are irreversible. This market should be reviewed as a priority.”

Ros Altmann, an independent pensions and economics policy expert, also believes the regulator needs to act. “It is absolutely essential that the FCA looks properly at what is happening in the annuity sales process,” says Altmann. “At the moment, there is no proper protection for customers and the likelihood of mis-buying and probably mis-selling too, is high. The regulator knows most people don’t understand annuities.”

The panel’s comments come as the country’s biggest retailer, Tesco, prepares to launch its own comparison service.

They also coincide with an FCA probe into the £12bn-a-year annuity market. This review is currently focused on finding out why only 50 per cent of people seeking an annuity last year shopped around, and how much income they lost by accepting the default rate offered by their insurer.

In an interview with the Financial Times, the FCA said that buying an annuity was a “a big decision, a once-in-a-lifetime decision for most people”, but resisted calls for an urgent review of non-advice websites.

“When we have the results of the first phase of our review of annuities, we will consider what further work, if any, we should undertake,” said Nick Poyntz-Wright, head of life insurance with the FCA.

Read Josephine Cumbo’s interview with Nick Poyntz-Wright at www.ft.com/wright-interview

However, he added: “We expect appropriate disclosures and safeguards to be put in place by those distributing on a non-advised basis. What we would insist on is that customers are getting clear information so they can see what the overall terms are and that they are pointed in the right direction.”

Hargreaves Lansdown, the country’s biggest broker, which recently launched an execution-only annuity service, said: “It is essential that investors get the best possible support when shopping around for a retirement income; this means choosing the right type of retirement income as well as getting the best possible rate. They also need to have a clear understanding of how much they are paying for a service and what they are getting in return.”

Payingtoomuch.com, another execution-only annuity website, said its charges were displayed as the regulator has intended.

The company said: “PTM always rebated part of the commission. In the end, however, the commission is less important than the final annuity payment, so for comparison customers should (and do) compare their annuity income to find their best option – not the option that pays the least commission, which would be an odd motivation.”

The new chief executive of Aviva has indicated that the insurer – which slashed its dividend this year – is planning to cut costs by more than the £400m it originally planned.

Speaking after his first quarterly trading update helped lift Aviva’s shares 7.2 per cent, Mark Wilson said there was “no doubt” the company had scope to deliver further savings.

Thursday’s rally left the shares just 13p shy of the levels they were trading at before the group cut its dividend 44 per cent two months ago.

However, Mr Wilson sought to downplay investor hopes of a speedy recovery, stressing that Aviva remained a “turnround story” and warning against unrealistic expectations. Aviva’s shares underperformed the FTSE 350 insurance index 60 per cent over the past five years.

Mr Wilson confirmed that the group is planning to follow up the reduction in its final dividend with the same reduction in this year’s interim payout. But, when asked about the prospect of future increases from the lower base, he said: “Our objective is to have a consistently and steadily growing dividend.”

Analysts said they were heartened by steps Aviva has taken to sort out a complex internal financial structure that they say contributed to the dividend decision.

The holding company has repaid £300m of debt it owes to the UK general insurance business – and Mr Wilson said Aviva had a “large list” of ways in which it could further reduce the internal debt from £5.5bn.

He said: “Is the level of internal debt an issue? Sure. Is it addressable? Sure.”

Analysts also welcomed Aviva’s decision to disclosure quarterly profitability for the first time. New business profits were 18 per cent higher than last year at £191m.

In addition, the amount of cash the group generated in the first quarter held steady, year-on-year, at £500m – in spite of some brokers forecasting a decline.

Aviva, which is planning to cut about 2,000 jobs over the next six months, said in its statement that it was “on track” to cut operating costs, so that they are £400m lower next year than they were in 2011.

However, Mr Wilson told the Financial Times: “I think we can exceed that . . . For example, our IT spend is too high. We spent over £800m on IT last year.”

The chief executive, who used to run the Asian insurer AIA, also pledged to reduce the level of restructuring costs at Aviva.

These amounted to £54m in the first three months of this year. Mr Wilson said the annual figure would remain “substantial” this year but added that it would be lower than the £460m level of 2012.

“We aim to get that to a more modest level next year,” he said.

©AP

Rescue services navigate flood waters after the River Wansbeck broke its banks in Morpeth

Insurers have agreed to provide coverage to households at high risk of flooding for an extra month, granting ministers more time to thrash out a longer-term deal with the industry.

Six weeks before the existing arrangement expires, the industry has extended its commitment to universal UK home insurance cover until the end of July.

Insurers have made clear the existing commitment is not viable in the longer term, partly because they argue that a lack of investment in flood defences has left them with a higher risk of claims.

They want ministers to introduce a scheme to subsidise insurance for high-risk households that is funded by all homeowners and underwritten by the state. Officials have been reluctant to agree.

In the absence of a deal, up to 200,000 homes may be left without affordable insurance because the industry is reluctant to cover them.

In the meantime, insurance brokers have given warning that homeowners in high-risk areas are already facing substantial rises in excess levels and premiums.

In a statement, Otto Thoresen, head of the Association of British Insurers, said there were “still important issues to resolve”, but that negotiations were at an “advanced” stage.

Owen Paterson, the environment secretary, said: “We hope to resolve the remaining issues soon.”

Mary Creagh, Labour’s shadow environment secretary, said: “Flood-hit communities are being hit now with higher insurance premiums and excesses because weak and incompetent ministers have failed to get a new deal.”

Billionaire investor Warren Buffett suffered a rare blow on Thursday after Standard & Poor’s cut his investment vehicle’s credit rating, citing an over reliance on its insurance business and raising questions over his succession plans.

The one notch cut to AA of Berkshire Hathaway by the rating agency reflects the unusual record and structure of the Sage of Omaha’s $277bn candy-to-cargo-train collection of businesses built around an insurance company.

S&P reaffirmed the underlying strength of Berkshire’s financial stability – the conglomerate has a $49bn cash pile – but said this was offset in part by the chairman’s preference for large stock holdings in a small number of companies, making its capital base more volatile than peers. The credit rating agency added that “management succession at [Berkshire] is also an offsetting factor”.

Eric Hedman, of S&P’s insurance ratings, told the Financial Times that “what that means is that they have a very unique individual, Warren Buffett, who continues to run the company”.

Mr Buffett said this month that his board had identified his successor, and that little would change at Berkshire after his death, but they had chosen not to make it public. His chairman and chief executive roles will be split, with Mr Buffett’s son serving as non-executive chairman to safeguard the corporate culture.

The rating agency also cited the large contribution to earnings of Burlington Northern Santa Fe, Berkshire’s railroad business, as a long-term risk factor.

The downgrade was technical, after S&P changed the way it analyses insurance companies this month. Adjustments to the Berkshire rating came earlier than for peers because it recently conducted a small bond offering.

Berkshire was unique in that its holding company held the same credit rating as its subsidiaries. S&P said that there would typically be a “three notch” difference to reflect the weaker claim on the underlying businesses. The downgrade by one notch reflected its superior performance relative to other insurers.

Mr Buffett, whose conglomerate owns a stake in S&P rival Moody’s has criticised S&P in the past. In August 2011, when the credit rating agency downgraded the US’s sovereign debt rating, he said it “doesn’t make sense”. A few days later S&P reduced its outlook on Berkshire Hathaway from “stable” to “negative”, along with 10 other insurers, as a result of the US downgrade.

Berkshire A shares were down 0.6 per cent by lunchtime in New York at about $168,000, a slight decline from Tuesday’s all-time high of $169,000.

Zurich Insurance is opening up to riskier investments to offset the impact of persistently low interest rates after its first-quarter results fell short of expectations.

In the first three months of the year, net income at Switzerland’s biggest insurer dropped 7 per cent compared with a year earlier, partly due to a decline in its net investment result, which fell 5 per cent to $1.69bn.

“We are not going to take investment risks just to chase yield,” said Pierre Wauthier, the group’s chief financial officer. “However, we have a very strong solvency position, which gives us the flexibility to take extra risk if the return is appropriate.”

As examples of Zurich’s adjustments, Mr Wauthier said that the group had increased its holdings of Italian bonds – albeit from a low level – at the expense of German Bunds, and was also looking at investing in less liquid assets such as loans or commercial real estate.

Mr Wauthier said that Zurich would also offset the decline in investment income by continuing with its cost-saving programme and optimising the operating performance of the group’s three divisions.

Overall, in the first quarter, Zurich’s total revenues improved to $21bn, up 4.6 per cent on the same period a year earlier. Gross written premiums increased 2.9 per cent to $14.9bn, while policy fees were flat at $634m.

Net income, however, dropped from $1.14bn to $1.06bn, or SFr6.69 per share. Analysts had expected net income of $1.14bn according to a poll by Bloomberg.

Meanwhile, Zurich’s combined ratio – an industry yardstick for costs and claims as a proportion of premiums – remained more or less flat at 94.9 per cent. A figure of less than 100 indicates profitable underwriting.

Martin Senn, chief executive, said he was “pleased” with the results, especially in view of the low interest-rate environment.

“All our core businesses delivered a high-quality operating performance while maintaining focus on underwriting discipline and expense management,” he said.

Operating profits at Zurich’s general insurance division declined 6 per cent, but rose 6 per cent in its global life business and 14 per cent in its Farmers unit in the US.

Analysts at Citi said that the performance of the global life and general insurance divisions was “weaker than we expected” but that they saw no reason to make significant changes to their earnings forecasts for the insurer.

Shares in the company were down 2.55 per cent at SFr263.40 in mid-morning trading in Zürich.

Greece’s government bond yields tumbled to their lowest level in three years on Wednesday after an unexpected upgrade stoked optimism that the first and biggest casualty of the eurozone crisis is gingerly on the mend.

Fitch Ratings lifted its assessment of Greece’s creditworthiness by one notch to B- late on Tuesday and highlighted the country’s “clear progress” towards fixing its budget and trade deficits.

Standard & Poor’s already rates Greece similarly but the upgrade fuelled a rally in Greek financial markets, sending the benchmark 10-year bond yield down to just above 8 per cent and the Athens stock market to its highest close since August 2011.

“It’s been a tremendous trade,” said Arvind Rajan, a senior fund manager at Prudential, a big US insurer that holds some Greek bonds. “Greece isn’t out of the woods yet but there has been a lot of progress.”

Hedge funds have been among the biggest beneficiaries from the turnround in sentiment towards Greece because they snapped up government bonds for a fraction of their face value when many other investors feared the country would leave the currency bloc.

The benchmark 10-year bond traded at just 14 cents on the euro at the nadir that followed inconclusive elections last May but rose to 63 cents on the euro on Wednesday.

Investors keen to profit from a potential Greek recovery have helped several domestic companies regain access to debt markets, and hedge funds are helping recapitalise the banking sector.

Nonetheless, many investors remain wary of Greece, spooked by its mammoth debt pile – which Fitch expects to hit 180 per cent of gross domestic product by next year – and the murky outlook for economic growth.

The Greek economy shrank a further 5.3 per cent year-on-year in the first quarter of 2013, according to data released on Wednesday. Although most economists forecast that Greece’s wrenching five-year recession will end next year, creditors face further losses with few expecting a strong rebound.

Fitch conceded that the sustainability of Greece’s debts was “far from assured”, but predicted that the eurozone itself would likely bear the brunt of another restructuring, given that private creditors now only represent a small part of Athens’ debt burden.

Although that would be politically unpalatable in many European countries, the remaining bonds in the hands of private investors enjoy strong legal protections that would make them tough to restructure – which has buttressed appetite among hedge funds.

Niche securities with returns tied on Greek economic growth – issued as a consolation to bondholders that accepted painful losses in last year’s restructuring – have also rallied strongly, indicating that hedge funds are starting to place bets that a recovery is in sight.

The payment of these warrants are dependent on the Greek economy hitting certain nominal levels and real growth rates.

Given the depth of the depression, Deutsche Bank analysts do not expect them to start paying out before 2023, but their cheapness has attracted some investors. The price shot up to just over 1 cent on the euro on Wednesday, almost quintupling from the same time last year.

A top-10 shareholder in RSA has publicly rebuked directors of the FTSE 100 insurer, criticising allegedly close ties with the firms that scrutinise the company’s accounts as well as their decision to slash its dividend by a third.

Standard Life Investments was the highest-profile investor to speak out at RSA’s annual meeting on Wednesday, when a series of individual shareholders also attacked executives’ pay levels.

In spite of the fierce criticism from some investors, RSA avoided a full-scale revolt in the latest sign that last year’s so-called shareholder spring has failed to repeat itself.

Including shareholders who actively withheld their support, more than one in nine votes at the meeting declined to authorise RSA’s directors to determine fees for auditors and also failed to back directors’ pay.

Insiders at the insurer were relieved the protest had been contained, although it was larger than usual for a listed company.

Guy Jubb, head of governance at SLI, said the Edinburgh-based asset manager was “surprised and disappointed” by the scale of the dividend cut. He added that communication of the change in policy had been “poor”.

“Excessive prudence was brought to bear,” said Mr Jubb, who has also spoken out about SLI’s concerns at other companies including BP, WPP and Barclays.

Mr Jubb, whose institution owns 2.6 per cent of RSA’s equity, also voiced disapproval of RSA hiring Deloitte for “lucrative consultancy work” in addition to its audit job.

Shareholders on Wednesday granted RSA permission to replace Deloitte with KPMG after the insurer recognised the “perception” of the auditor’s independence could have been impaired.

However, SLI criticised the audit committee for allowing this perception to arise in the first place and said it was “unwise” to change auditors so soon after the arrival of a new chairman and finance director.

Mr Jubb added the appointment of KPMG also “gives rise to an unfortunate perception of conflict” given connections between RSA’s new auditor and Alastair Barbour, chairman of the audit committee. He retired from KPMG in March 2011 after a 36-year career with the firm.

Meanwhile, private shareholders were critical of RSA’s plans to pay two executives £1.5m in bonuses and share awards for 2012, when pre-tax profits fell by a fifth.

They also attacked a £100,000 termination payment to John Napier, who has stepped down as chairman.

His replacement, Martin Scicluna, on Wednesday issued a fresh defence of the “tough” decision to cut the dividend in the face of the criticism.

“You employ us to manage this company prudently,” he said. “We consider it important to do the right thing.”

The proportion of earnings being paid out as dividends would have become unsustainable, Mr Scicluna said, given falling returns from RSA’s fixed income-dominated investment portfolio.

He highlighted that directors’ overall remuneration fell from £6m in 2011 to £4.3m last year but pledged a comprehensive review of the pay arrangements.

Mr Scicluna said that the appointment of KPMG followed a formal tendering process. The board was satisfied Mr Barbour was fully independent of his former employer.

Shares in RSA rose 4p to 113.5p. They have fallen 20 per cent from their 2013 high in mid-February.

The owners of Partnership Assurance have fired the starting gun on London’s latest listing, hoping investors will value the private equity-backed annuity provider at over £1bn – about six times higher than the sum they paid for it in 2008.

A successful listing valuing Partnership at £1.4bn would also make a stock market listing of Just Retirement, a rival annuity provider, more likely, according to people familiar with the matter.

The company, which sells higher-paying annuities to retirees whose life expectancy has been cut short by illness, is owned by Cinven, which has an 80 per cent stake, and its employees, who own the remainder.

Partnership, which is among the fastest-growing midsized companies in Britain, sought to whet investors appetite on Monday by announcing another batch of robust financial results alongside its formal intention to float.

The Surrey-based group wrote £1.26bn worth of premiums in 2012 and made operating profits of £112m. Both metrics were up more than two-fifths on a year earlier.

The owners – who took control of the business in a management buyout from Phoenix Equity Partners – are preparing to float only a minority holding and plan to retain as much as three quarters of the equity.

Partnership is also seeking to issue about £120m worth of new shares in the long-awaited offer, proceeds of which will be used to repay about £80m worth of loans, mostly to Lloyds TSB. The listing would leave Partnership debt free.

Managers and advisers are set to embark on a roadshow taking in prospective investors in the US, and possibly continental Europe, as well as the UK.

David Richardson, newly-arrived finance director, said the listing was more likely to appeal to growth rather than income funds, as the company prioritises writing new business over paying dividends.

The value of premiums written in the specialist annuity market has tripled since 2006 to £4.5bn, according to Partnership. Over the same period, it has more than tripled its share of the market.

Last year, the company wrote more than a quarter of the industry-wide total, according to the Association of British Insurers. Retirees with conditions such as cancer and multiple sclerosis have been attracted by Partnership’s offerings, which are on average 20 per cent more generous than mainstream annuities, said Steve Groves, chief executive.

He added the company can offer such deals because of its proprietary database built up over two decades that links medical information with longevity.

Partnership’s average customer has a life expectancy of little more than a decade after purchasing their annuity compared with about 25 years for a mainstream provider.

Mr Groves argued the company’s strong rate of growth was sustainable given factors including regulators are pushing companies to make customers aware of the choice of annuities on offer.

The offer, expected to be completed by the end of next month, is being handled by Bank of America Merrill Lynch; Morgan Stanley; Keefe, Bruyette & Woods; and Panmure Gordon.