UK - Standard Life with-profits policyholders have almost no chance of seeing their funds grow after the mutual slashed its equity reserves, experts warn.
Standard Life’s 2003 annual results show it has sold off £7.5bn of the equities that were backing its with-profits funds.
The mutual has slashed the equity weightings of its guaranteed with-profits funds – which form the bulk of its assets – from 59.2% to just 30%, leaving the rest in property and fixed income.
The equity backing ratio of Standard Life’s non-guaranteed with-profits funds will remain unchanged at 75%.
John Scott & Partners research and investment manager Patrick Connolly said the equity sale meant that guaranteed with-profits policyholders were unlikely to see any growth.
Connolly said: “Standard Life had to keep enough cash in reserve to match guarantees. The thing is that there is not going to be much growth, now investors have to pay for those guarantees. Now they have to decide whether they want to do so.”
The sale follows Standard Life’s row with the Financial Services Authority about the true strength of the mutual’s balance sheet.
Group chief executive Sandy Crombie admitted the new regulatory regime and changes in the market place had “presented us with some difficult challenges over the last few weeks”.
But he added: “On the new regulatory reporting basis, we expect to report that Standard Life will show a realistic surplus of more than £4bn. This should reassure both policyholders and bondholders that we have sufficient capital to support our business.”
Standard Life Investments’ assets under management rose by more than 15% to a record £86.5bn in the year to November 15.
Over that period, third-party assets under management rose 37% to £15.3bn. Of that amount, SLI’s UK institutional business sales were up 23% on 2002 levels to £1.5bn.
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