Previous years show that the financial strength of life offices has been on a steady rise. Last year looked as if the tide was starting to turn, proving that not all life companies were immune to economic turbulence.
Although not known as the most exciting area of the industry, with-profits are still showing signs of interest. An improvement in firms’ free asset ratio (FAR) is one aspect, showing that companies now have more money on their books and will be able to pursue investments. All survey figures reflect data as at 31 December 2012.
In comparison to last year, this year’s survey results show some life offices have experienced a slight increase in their FAR. Table A shows the top 10 with-profits life offices in the survey according to the realistic FAR – calculated by deducting a firm’s total liabilities from total assets, dividing the result by the liabilities and multiplying by 100 to produce a percentage.
This year, the same firms as last year hold the top five spots – albeit in a slightly different order. Teachers Assurance has remained in the top place, with a realistic FAR of 40.2 per cent – an increase of 7.4 percentage points. NFU Mutual has climbed to second place with 24.6 per cent – an increase of 5.5 percentage points. Wesleyan, Scottish Friendly and Royal London take the other three places. Aviva Life and Pensions UK and both the Friends Life Limited FLAS with-profits fund and Friends Life FP with-profits fund are newcomers to the Table in seventh, ninth and 10th places respectively.
What’s in a name?
Table 1 shows the realistic assets, costs and liabilities of the life offices compared with results from both the 2011 and 2012 surveys. Some notable changes from previous surveys include name changes, for example, Phoenix Life Assurance Limited was formerly Pearl Assurance – additionally, all London Life policies have been transferred to Phoenix Life Assurance.
Winterthur is now known as Friends Life WL and there are two new additions to the Table from Friends Life – the Friends Life FPLAL With-profits and Friends Life FLC Old With-profits products. There are also some absentees; Legal & General was unable to participate due to a lack of resource and “high workload”, and Guardian Assurance did not want to provide figures in the same way as previous years as it feels it “could be misleading” – in these instances we collected what data we could from the company’s FSA return.
