View more on these topics

Firms would have risked insolvency without bonus cuts, says analyst

Analyst Credit Suisse First Boston has downgraded the entire UK life sector and claims insurers would have risked breaching solvency requirements if they had not cut bonuses.

Flexitime – its report into the life sector published last week – criticises the FSA for not demanding reductions in policyholder payouts and focusing instead on stopping companies becoming insolvent.

It says Legal & General would have had a free-asset ratio on June 30 of 2.2 per cent if it had not cut bonuses. Norwich Union and Friends Provident would have had FARs of 4.3 per cent and Pru 5.1 per cent. Regulatory requirements are for a company to have 4 per cent more in assets than liabilities.

It says L&G&#39s FAR has declined more than others because of its greater equity weighting and mismatching of liabilities. It says Pru&#39s £6bn orphan assets put it in the most comfortable position of the four insurers.

CSFB predicts a shrinking market for with-profits because of lower bonuses. It says: “We do not expect the with-profits bond market ever to recover its glory days.”

FSA press officer Karin Loudon says: “It is up to the businesses to decide what to do to remain solvent. The regulator is not there to make business decisions for the companies that it regulates.”

L&G was unable to comment because of its current rights issue.

Recommended

S&P has negative outlook on Standard

Ratings agency Standard & Poors has revised its outlook on Standard Life to negative but maintains its AAA rating. It says its capitalisation has weakened and the options open to Standard to manage capital following market volatility and any further falls are limited. S&P also says costs and payouts will have to be carefully managed, […]

In the offing

The Diary would like to praise the outgoing managing director of UK financial services at AMP, Tom Fraser, for a remarkably refreshing attitude to press relations displayed at the ABI awards dinner.When questioned by a Mail journalist about his future, the antipodean head honcho might have laughed off such rumours with a cheerful: “No comment, […]

Cost cutters

The small corporate private medical insurance market, encompassing schemes covering three to 99 lives, saw very little innovation during the 1990s.Some new health insurers came along, offered “me-too” type products – and then went. Established insurers tweaked their benefits but as comprehensive cover became more expensive, they turned to fragmenting hospital lists and introducing budget […]

Moore&#39s code

For the IFA community, attacking Standard Life has for years been all but unthinkable.This, after all, is the institution that has continued to support independent advisers, both large and small, while many competitors have treated them as an increasing irrelevance, with some actively colluding in efforts to hasten the demise of the humble high street […]

FAMR – a familiar response

Pension specialist Fiona Tait takes a look at the Financial Advice Market Review and assesses the three areas where it suggests improvements can be made With significant budget changes ruled out (for a while anyway), the pension community briefly turned its attention to the FCA’s final report on its Financial Advice Market Review (FAMR), hoping […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment