The £4bn LV= With-profits fund returned 5.7% in 2007 during a period of market turbulence, down from 11.2% in 2006.
LV='s announcement is the latest in a series of disappointing returns from other with-profits funds for 2007 including 5% from Scottish Widows and 6.5% from Norwich Union. These figures are approximately half the returns recorded in 2006.
However, following smoothing, LV= is able to offer an effective return over the year of 9.9% for a 10-year life policy and 12.5% for a 25-year life policy.
The group also announced an estimated £100m bonus will be added to with-profits policies and With-profits pension annuity top-up bonus rates have been increased.
It informed policyholders a £21,000 surplus is currently being paid on a maturing 20 year £50,000 mortgage endowment policy and an unequivocal mortgage endowment guarantee has been maintained.
The asset allocation of the with-profits fund shifted slightly in 2007 compared to the previous year.
The equities weighting dropped from 62.5% in 2006 to 60.5% in 2007 while property fell from 15.1% to 14.6%. However, weightings in fixed interest and cash/other rose from 17.7% to 19.8% and 4.7% to 5.1% respectively.
Commenting on the results, Ian Blanchard, With-Profits actuary for LV=, says: “The achievement of a 5.7% fund return over 2007 is a very creditable performance, and has enabled us to add a smoothed return of over 12% to our traditional with-profits policies.
“So far in 2008 the equity markets have been extremely volatile, with one of the largest FTSE-100 one day falls on record. Our policyholders can rest assured that because we smooth investment returns – a key feature of with-profits – much of these day-to-day fluctuations will be ironed out.
"In fact, thanks to the more positive equity performance of recent years, if returns were flat over the next two years, our with-profits policyholders would still have positive annual returns added to their policies during 2008 and 2009.”IFAonline
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