A happy New Year to all our (many!) readers. As is customary, we look at what we achieved last year, and look forward to what we may achieve in the coming one.
We achieved, in a way that we never expected, a greater visibility for the valuation and capital problems we have highlighted in the course of our work. We ran three main campaigns last year.
Equity Release selling We challenged the way the Age UK was referring elderly people to a commercial partner (Hub Financial) that routinely recommends equity release deals from its own parent company (Just Group). The Eye alluded to the practice on February 20, the Daily Telegraph in more detail on 4 May, although it omitted the Eumaeus mystery shop after legal threats from Age UK solicitors. The Eye reported on the mystery shop on August 22, and DB was featured on the ITV tonight programme, sadly no longer online, on the same subject. On 14 December KD was quoted by This is Money, referring to a FCA review of ERM pricing.
Magic Money Tree On 14 April, the Financial Times reported on an “actuarial trick that allows insurers to conjure capital from thin air”, aka Matching Adjustment, which drew a fierce response from the industry, also from John Taylor, president of the Institute and Faculty of Actuaries, who elevated one of the weirdest emanations of the human mind to the status of a “fundamental actuarial principle“. (Other actuaries we spoke to were not so enthusiastic about this “principle”). On 5 September the FRC initiated a review into the statutory accounting of equity-release mortgages (ERMs), “a move which may result in changes to life insurers’ profits”, according to InsuranceERM.
Part VII transfers On 27 October, the FT reported on a letter (that we still cannot publish) from policyholders and insurance experts on the PRA’s apparent willingness “to nod through transfers of savings from long-established insurers to newer specialist rivals”, referring to a proposed transfer of annuities from Prudential to Rothesay Life under the Part VII process. This article provoked a peevish response from Rothesay Life, via its chairman Naguib Kheraj in a letter to the FT, followed by our own letter (“Imagine if punters demanded some of their winnings just before the race started”). I raised the same concern at the High Court over the transfer of annuities from Equitable Life to Utmost.
None of these campaigns is dead. We await the FCA review of equity release pricing, Matching Adjustment is still with us, and the date for the Rothesay transfer appeal later this year has not yet been confirmed.
Separately, the Law Commission will be publishing their review of leasehold pricing this week, probably on January 9th. We have no sense of what their verdict will be, but stay tuned!
Best wishes for a happy and prosperous New Year, to all, even to the solicitors who write us so many letters, for they are surely being paid well for their efforts.