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Results season begins

Aviva stole the limelight this week kicking off the life sector’s interim reporting season with news that it has finally reached a £1bn reattribution deal with policyholder advocate Clare Spottiswoode.

Policyholders can opt for the pay-out by shareholders in exchange for signing away their rights to future distributions from the inherited estate.

The news comes after nearly two years of wrangling and more than 100 meetings between Spottiswoode and Norwich Union over what to do with the surplus in the CGNU Life and CULAC funds.

The cash-payouts will be a minimum of £400 and an average of £1,000. They come in addition to the special distribution of £2.1bn that was announced earlier this year, meaning policyholders that take up the offer will have collectively taken a 70 per cent slice of the surplus.

The offer was endorsed by a “delighted” Clare Spottiswoode while the press also heralded it a “victory for consumers” and a move that “shames” rival life offices such as Prudential, which recently backed out of a reattribution of its £8.7bn inherited estate.

But Norwich Union’s decision to outsource the servicing of its beleaguered Lifetime wrap to Scottish Friendly met with a less jubilant response.

Advisers welcomed an end to the uncertainty over what would happen to clients’ assets that have remained on the wrap since it closed to new business last summer, but there are still concerns over how easy it will be to transfer clients off the NU proposition for those advisers whose patience with the provider has simply worn too thin.

Aviva’s results also showed how expensive an exercise Lifetime has been for Norwich Union, which lost £23m on the venture during the first half of 2008.

Without tempting fate, the interim results for the insurers that have reported so far are not showing signs that the UK life sector really is the “next domino to fall” in the global credit crunch, as Keefe Bruyette and Woods recently predicted.

Prudential saw an increase in UK operating profit during the first half by 9 per cent to £504m and Aviva reported a 14 per cent increase in UK life operating profit to £471m.

Panmure Gordon director Barrie Cornes says the results are “pleasantly surprising” and margins seem to be holding up well in the sector. It seems that recession fears are not yet cutting into peoples’ pensions and other savings provisions, but this may take a while to feed through to company balance sheets.

We will also have to wait and see what unfolds over the coming week as Legal & General, Friends Provident, Axa, Aegon and Standard Life publish their results, in order to see whether these resilient figures are just a sign of the early reporting insurers taking greater market share.

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