Category: Private Eye

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Transfer window

Just noticed an article in the latest Eye about the PAC-Rothesay transfer. The Court Hearing is slated for 8 November.

Includes this:

Concerned Prudential policyholders say this puts them at greater risk, not least because they have a higher age profile (believed to be largely 75 -plus). Without applying the matching adjustment, an analysis in InsuranceERM magazine exposed recently, Rothesay is one of only two out of 14 life insurers in the UK that would be insolvent. So if anything goes wrong in the relatively short term, or the rosy view of Rothesay’s portfolio proves over-optimistic, they’re in trouble.

The policyholders also say the independent expert, Nick Dumbreck of risk management advisory firm Milliman LLC, hasn’t listened to their concerns adequately, including on the critical point of matching adjustment.

Milliman advises on a number of pension transfers, and the current dispute is effectively a test case for the business of selling portfolios regardless of the wishes of policyholders. If the Pru and Rothesay lose, it could kibosh the practice.

 

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Stretching the bonds

 

Another great piece on insurance accounting from the Eye this week. As we always say, support great investigative journalism and buy a copy, but the crux of the article is our longstanding claim that the potential costs of no-negative-equity guarantees have been drastically understated.

Apparently there have been complaints about this since October 2018 to the Financial Reporting Council (FRC), the accounting regulator. After nearly two years, ‘the dozy regulator’ has finally addressed the point, concluding that “the guarantees should be valued at what they would sell for in the market, and since most equity release providers who might buy them (they wouldn’t, in reality) all value them in the same way, there’s no problem!”.

The FRC did not ask shareholders or policyholders what value they might place on these products, of course.

“If and when the final reckoning comes for the life insurance companies, as it did for Equitable Life 20 years ago, it might well be the bean-counting that does for them.”

We shall see.

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Bailey out in the cold?

Unfortunately timed article in the Eye Christmas edition, on how the rising tide of criticism of the FCA would make Bailey’s appointment as Governor “a tough sell”. Ho ho, as Kevin would say.

What can I say, except to wish Eumaeus’s readers the very best for a happy Christmas – and a merry New Year – when we will of course be back.

 

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Matching adjustment reaches Parliament

Just spotted this from Hansard (02 October 2019, Volume 664), reporting a debate that day on Leasehold and Commonhold Reform.  Sir Peter Bottomley:

As an example for those who do not read Private Eye on the day it comes out, there is a story about Rothesay Life, which apparently has £1.5 billion of loans. It can revalue the interest over 30 years and take it almost as instant profit. That is the kind of thing that leads people to say, “I am going to be greedy and get away with things as long as I can.”

See our story here.
There could be more to come, so stay tuned.
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The Mysterious Mystery Shop

Dean’s article “Just one in the Eye for Age UK?” (22 Aug 2019) tells an interesting story from the latest issue of Private Eye about a mystery shopper who contacted Hub financial via the Age UK website, enquiring about an equity release mortgage (ERM). When he took Age UK’s advice to “dip his toe” into equity release, his enquiry was channelled through Hub’s independent panel of lenders and he was offered an ERM loan from one particular firm. This offer came as a bit of a surprise to the toe tipper, however, because he had already been offered an ERM loan from another firm that was also on Hub’s panel, and in his opinion, this previous offer from the other firm was a better one. So one wonders what is going on.

These articles got me thinking: how would one go about establishing the potential loss to an ERM borrower from going with one lender, when an alternative lender would have given them better terms?

Continue reading “The Mysterious Mystery Shop”

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Just one in the Eye for Age UK?


A curious piece in the Eye yesterday claimed that a mystery shopper contacted Hub financial via the Age UK website, enquiring about an equity release mortgage.

Get a copy yourself and support good investigative journalism, but briefly, the shopper was quoted 5.35% from Just Group, a provider on the Hub ‘panel’ of lenders, as being the best value.

When the same shopper contacted L&G, also supposedly on the panel, he was quoted only 5%. He complained to Sir Brian Pomeroy (Age UK chairman of trustees) saying he might publish something about the problem, but instead got ‘a stiff letter from Julian Pike of expensive “reputation management” solicitors Farrer and Co’, suggesting firmly that he should not publish.

Just fancy that.