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Cazalet fears MVRs hitting with-profits

Independent analyst Ned Cazalet warns that the stockmarket volatility could see the return of market value reductions on with-profits policies.

Cazalet says although life offices are much better equipped to assess their liabilities than they were during the stockmarket crash in 2003, the recent choppy market could see providers reintroducing or raising their MVRs.

Norwich Union is one of the most recent providers to remove the last remaining MVRs on its funds after it said that continued stockmarket growth had helped improve the performance of its funds.

Senior actuary David Riddington says: “We are monitoring the situation but are not intending to reintroduce them at the moment. We would want to see quite a substantial change and be reasonably confident that it was going to stay at that level for a period of time before we reintroduced them.”

Cazalet says the poor performance of bonds coupled with the uncertainty around the price of commercial property means providers could be facing a tough time.

He says: “With-profits had the stuffing knocked out of it in early 2000. We need to be wary of these negatives in the stockmarket being fed back to policyholders in the form of some providers reimposing MVRs.”

AKG Actuaries communications director Guy Vanner says: “If there is a sustained period of instability and considerable further falls, then I think reintroducing MVRs is one of a number of measures that with-profits providers might consider.”

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