Scottish Widows is advising caution when comparing the financial strength of its competitors because of the different reporting measures that life offices are using.
Widows says it has arguably the strongest with-profits fund of the major life offices but warns IFAs to distinguish between life offices using ABI and FSA reporting protocols.
Widows' WP fund has a risk capital margin coverage ratio of more than six under ABI assumptions but says this will fall to around three under the FSA's stricter reporting regime.
Most other providers' RCM ratios – the number of times their fund can cover certain disaster scenarios – fall between two and six under the ABI assumptions but most are yet to give figures under the tighter FSA assumptions.
Norwich Union says it is too soon to start putting out figures based on the FSA's assumptions because they will only be finalised at the end of 2004 and argues that IFAs should also consider a fund's equity backing ratio when looking at whether it is likely to give a good return.
Scottish Widows head of industry relations George Andrew says: “Care is needed in comparing figures. Although most companies have quoted figures based on the interim ABI guidance, the final figures are more likely to be closer to the FSA calculations.”