Our reply to the letter by Rothesay Life chairman Naguib Kheraj was published today in the FT, with a lovely picture of the bookies at a race course. “Imagine if punters demanded some of their winnings just before the race started”.
Read the letter if you have a subscription, otherwise the main points are these.
- Matching Adjustment is akin to allowing punters at a horse race to demand some of their winnings just before the race has started, on the grounds that the claimed winnings can be deemed to be certain. The analogy is not ours, actually, but the idea of Howard Mustoe at the BBC – see the partial transcript of his program on Equity Release, 7 August 2018 (link).
- Our characterisation of MA is shared by distinguished independent experts, such as David Miles (former staffer at Bank) and Martin Taylor (current staffer) who have expressed similar concerns.
- Our letter was not an inaccurate depiction of Rothesay’s capital positiongiven that the numbers were taken from page 57 of Rothesay Life’s own 2018 Solvency and Financial Condition Report.
We end “a life company that would be technically insolvent but for artificial MA capital has, we are told, a “very strong” capitalisation. Fancy that.”