The transcript is here. Some points to consider.
- The independent expert, Nick Dumbreck (Milliman), calculated that ‘in the case of Rothesay, an SCR coverage ratio of 100% equates to a likelihood of its assets being sufficient to cover its Technical Provisions in one year’s time of 99.5%; an SCR coverage ratio of 130% would equate to a likelihood of its assets being sufficient to cover its Technical Provisions in one year’s time of 99.96%; and an SCR coverage ratio of 150% would equate to a likelihood of its assets being sufficient to cover its Technical Provisions in one year’s time of 99.994%’.
- The probability of default is thus lower than the probability calculated by the HBOS advanced IRB model at the beginning of 2008. Policyholders can rest assured, then.
- Matching Adjustment was not discussed at all, so presumably not deemed relevant to policyholder interests. Question: if MA were taken away, would that change the probabilities referred to above?
- ‘As at 31 December 2018, for Solvency II purposes, Rothesay had total assets of about £36 billion, Technical Provisions of about £32 billion, Own Funds of £3.89 billion and a SCR of £2.16 billion. Its SCR coverage ratio was thus 180%.’
- Dumbreck argued that while Prudential has a greater absolute capital surplus than Rothesay, ‘the levels of surplus relative to the amount of its technical provisions are of the same order of magnitude for both companies. He expressed the view that it is this relative cover for liabilities that is material, rather than the absolute surplus’.
More later.