UFO Info Week-End

Unit-linked policies which move in line with stocks have become more popular

Unit-linked policies, which move in line with stocks, have become more popular.. Lots of people in 2004 will be reviewing their position,” Mr Prosser said.Equitable Life, Royal & Sun Alliance, Britannic Assurance, NPI, Pearl and Scottish Mutual have all closed to new with-profits business in recent years to conserve capital. The new rules have caused rival insurer Standard Life such serious problems in finding capital for its guarantees that it is now considering a stock market float.Around 10 per cent of L&G’s new business during 2003 was with-profits, down from around 15 per cent in the year before. With-profits has been at the heart of the insurance industry for centuries. Whether with-profits can continue to be provided is a big question and we will be looking at it in the next six months.

A with-profit contract has lots of free benefits and guarantees – these are quite expensive to reserve for in the new realistic rules. The Financial Services Authority has also been trying to improve transparency in the arcane world of with-profits investments for the past three years, as well as introduce new solvency tests.”The changes to transparency from the FSA and the Sandler review and the new reserving requirements spell the end for with-profits. With-profits – a pooled fund of equities, bonds, cash and property that smoothes payouts to cushion the blows from stock markets – require substantial capital backing and the new regime insists that companies reserve in full for all guarantees. He also said the move to realistic reporting would be the death-knell for the £380bn with-profits savings industry. David Prosser, the chief executive of Legal & General, said he may close the company’s £18bn with-profits fund as a result of new solvency tests.

The Bank of England yesterday launched a fierce retaliation against the liquidator suing it over the failure of BCCI, dismissing a key plank of its case as a “paranoid conspiracy”.
The liquidator, Deloitte & Touche, was also basing its claim on “desperate and vexatious” arguments, the Bank’s QC, Nicholas Stadlen, told the High Court.Deloitte is suing the Bank for £1bn in compensation, alleging it failed in its duty as financial regulator in the 1980s. The French Government has signalled its preference for a national deal.M. Landau said: “The premium of less than 4 per cent over the Aventis share price last week was insufficient.”The deal would also mean his shareholders would have to share the risk that Sanofi’s main product, Plavix – a stroke prevention drug which accounts for 17 per cent of group sales – might face copycat competition if it loses a patent case later this year.. “The management are recommending to the supervisory board that the offer is rejected,” said one.