UK - Royal & SunAlliance has set aside £1.2bn to cover guaranteed annuity option liabilities, but a leading analyst warns there is more pain to come.
R&SA – which is in talks with the Financial Services Authority – faces liabilities on both its £9bn Sun Alliance & London fund and the £11bn R&SA Life & Pensions fund. The SA&L fund has GAO liabilities of over £850m while the R&SA Life & Pensions fund has liabilities of over £300m.
Ned Cazalet of Cazalet Financial Consulting claims R&SA disguised its GAO liabilities by using reinsurers. Cazalet said: “SA&L is in a worse financial position than Equitable Life.
“At the end of the year they appeared to be statutory solvent with an excess capital position of £194m, but actually that’s only after they hid a load of liabilities with reinsurers.”
Cazalet added that the R&SA Life & Pensions fund is suffering from the same problem as its sister fund.
He continued: “Both are in a mess and I think that early indications show that there’s more pain to come.”
Meanwhile, R&SA is to be fined by the FSA over the handling of the pensions mis-selling review. R&SA has not received any indication as to when or the amount that it will be fined.
Although R&SA declined to reveal any further information, it did stress that it was not being fined for mis-selling pensions, rather it was the way that it handled the administrative work which resulted from the review.
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