WITH PROFITS FUNDS in the UK suffered a one-third fall in the value of their solvency margins last y...
WITH PROFITS FUNDS in the UK suffered a one-third fall in the value of their solvency margins last year, according to a new study from Nottingham University Centre for Risk and Insurance Studies, the FT writes.
The average free asset ratio among the 20 biggest life insurers fell from 9.9% to 6.6% - however, the fall since 1999 is even greater: then average FARs stood at 22.5%.
The study also warns that current FARs are calculated with what the FSA has deemed to be £11bn in "financial engineering", the FT adds, which although it can provide some stability is another risk factor making comparisons of FARs between companies more difficult.
THE TIMES TAKES a less lenient attitude towards the £11bn figure, calling it "unearned money [used] to bolster their financial strength."
The paper also notes that: "the excess capital stood at just 2.7 per cent, after stripping out the margin set down by regulators as a minimum solvency level and the £11 billion of 'financial engineering'."
Some £8bn of the £11bn came from unearned future premiums, and the remaining £3bn from contingency loans and reinsurance contracts.
Without relying on unearned future income figures, Standard Life's FAR would have been 1.1%, and Equitable Life's just 0.9%, the paper says.
CIS and the Pru by contrast did not rely on such accounting methods, and still showed FARs of 5.4% and 4.6% respectively.
The FSA is set to rule out the use of unearned income in calculating FARs as of next year, The Times adds.
THINGS ARE LOOKING better for the housing market, The Daily Telegraph reports.
Recent figures from Rightmove, a service tracking house prices, indicates that following the slump in prices in March in markets such as London, April saw a distinct rebound as the "Baghdad bounce" took hold.
Annecdotal evidence from real estate company Hamptons too, which reports that the number of transactions in the 50 offices it monitors jumped 62% in April compared with March.
The company adds that some regions such as the Cotswolds are going through another boom as redundant City folk relocate, and sales are as high as a year ago at the height of the boom.
However, The Telegraph says other anecdotal evidence suggests the opposite is happening, and that the market is still in a long-term downward trend from the top of the cycle, with average house price growth this year now pegged as low as 4% in some quarters.
ANOTHER DAY ANOTHER departure of a well-known name from Scottish Widows Investment Partnership, SWIP, reports The Scotsman today.
David Erskine, head of UK and European research is set to join the new boutique manager set up by former SWIP duo Sandy Nairn and Graham Campbell, who left in March this year.
The paper says that there have been rumours SWIP is trying to force its remaining senior executives to sign new contracts with longer notice periods, but the company denies this, saying that in fact contracts are being offered with shorter notice periods.
‘In the know’
Owen to pay £3m
Lasting power of attorney
Three risk profiles
Caused by falling oil price