Wesleyan Assurance Society and NFU Mutual have been awarded 10 out of 10 ratings for financial strength and stability by Cazalet Consulting's latest solvency research.
Detailed analysis of life office financial strength has yet to be completed for all companies, says Ned Cazalet of Cazalet Consulting, however, his study of the conventional and unitized with-profit products at Wesleyan – for the With-Profit Fund Asset Mix & Investment Performance Data report 2004 - along with their financial results reveals they are one of the strongest companies on the market because it has more surplus capital underpinning than any other life office as well as a strong management structure.
NFU Mutual has a similar financial strength, says Cazalet, because the firm runs such a conservative operation and again because it has substantial capital behind the scenes to support its funds.
Cazalet points out, however, it is still extremely difficult to assess the financial status of financial services companies, even considering the FSA’s development of the new realistic reporting regime, as it takes several weeks to break down a firm’s financial figures and work out how secure each element of a life office is.
In this sense, understanding the financial stability of a firm is likely to be virtually impossible for IFAs to truly know on a day-to-day basis, suggests Cazalet, as few IFAs are able to understand how to read a firm’s financial stability and keep it up-to-date.
“Solvency numbers on their own mean nothing otherwise the strongest ratio on a company would be a firm like NPI. When you try to work out how a firm gets its numbers from scratch without any prior knowledge of their financial history, their management and operational structure, it would take at least a week or two to try and understand,” says Cazalet.
Having analysed Wesleyan’s financial statistics, Cazalet, discovered Wesleyan has one of the highest equity weightings in the industrywith 69% of funds held in equities compared to a survey average of just 33%, to give the firm an investment return of 17.2% or 18.6% over five years.
Back in 2000, the average equity investment within each life office stood at around 66%.IFAonline
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