Free assets of with-profits companies rose from an average 4.7 per cent of total funds at the end of 2002 to 6.4 per cent last year under the new realistic reporting regime, according to research by consultantcy Ernst & Young.
This is the first increase in free assets since 1999. The free assets of the 31 biggest with-profits offices rose by 36 per cent from £22bn to £30bn, according to E&Y's UK life insurance companies 2003 capital and solvency review.
Wesleyan Assurance was the strongest with-profits office at the end of 2003, with 26 per cent in free assets under the FSA's new realistic reporting regime, allowing it to have more than 65 per cent of its fund invested in equities – the highest equity-backing ratio of all providers.
Alba Life comes bottom of the equity-backing table with no equity investment.
Across the sector, the average equity-backing ratio was down from 45 per cent of with-profits assets in 2001 to 38 per cent in 2002 and 36 per cent last year.
The review looks at 88 life insurance companies and shows with-profits and non-with-profits firms have an average overall expense ratio of 1.3 per cent.
Ernst & Young head of life actuarial practice Tim Roff says: “There is a wide variety of equity content among offices but it is unlikely that equity exposure will increase significantly in the short term for most funds other than those offices with the most realistic financial strength.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “Many people will be surprised when they look at how strong Wesleyan is in comparison with other life offices. Anyone thinking about putting money into with-profits at the moment could certainly do worse.”