Broker profits are up, with faster growth expected, but insurer declines in income and profit dampened optimism

Profitability among insurance brokers rose for the fifth consecutive quarter at the beginning of this year, with the first growth in headcount in two years, according to the latest CBI/PricewaterhouseCoopers financial services survey.

The survey, released on Monday, found that brokers have seen profits rise despite a slight drop in business volumes. There was a rapid growth in employees, it found, with further, faster growth expected over the next three months.

Respondents were also more likely to invest in marketing and IT – more so than since June 1999 and September 2002, respectively.

This mood was not reflected among general insurers, however. Their optimism fell for the first time since September 2008, on the back of a sharp decline in business volumes, income values and profitability. But employment rose slightly for the first time in three quarters and investment intentions for the year are no longer negative.

Overall, the survey found that activity in the UK financial services sector was broadly stable over the first quarter. The main worry was about legislation, with respondents expecting significant increases in the cost of compliance.

PwC UK insurance leader Andrew Kail said: “Non-life insurers’ run of confidence that began at the end of 2008 would appear to have come to an end. As predicted, activity declined during the first months of the year and demand for personal and commercial customers is at the lowest level seen for several years.

“There is a general feeling in the sector that the favourable trading conditions of 2009 will not be sustained in 2010.”