Friday, 9 March 2012

FTSE results and spare capital - Old Mutual

UK results season - my favourite time of year (note to self: get out more). Old Mutual have put their goodies in the window today, and while not disclosing how much Solvency II project spend they have laid out in the last year, they have been very bullish on project preparations to date, for example;
  • "The Group comfortably met the recent stress tests required under the EU-wide Solvency II project"
  • "In tests there was no scenario when the Group's capital reduced below the SCR level. "
  • "We were the first major UK retail group to submit Group QIS5 results and the Self Assessment Questionnaire on the internal model to the FSA" - not such a boast now the FSA have ripped the template up!
They also indicate the most material uncertainties left in the EC/EIOPA/Parliament squabbling,which is very refreshing - latter seems most perturbing on their front;

·         "Discussions on the treatment of EPIFP (Expected Profits In Future Premiums) have moved in a positive direction and we believe they are likely to be eligible as Tier 1 capital under Solvency II".
·         "Bermuda was included in the first of three groups of non-EEA jurisdiction equivalence assessments. EIOPAs findings from this assessment were inconclusive and will be revisited this year. The equivalence of South Africa will be reviewed in 2012 as part of the second group of assessments".
·         "The latest draft regulations have suggested that a short contract boundary may be applied to some of the Groups long-term unit-linked insurance business. We believe this proposal is not aligned with an economic balance sheet valuation of this business and we have raised concerns about this definition with the FSA and other bodies".

The bits on capital are just as lively as those released to date (captured here and here), with some shenanighans regarding what is in and what is out for FGD surplus purposes on bond capital where they have followed Aviva's "but if we show it like this it's better..." philosophy!

Their FGD requirement actually came down y-o-y unlike Aviva's, though this was by virtue of "required capital" falling by more than the "available capital" fell by (if that makes sense!). Most bizarrely, the UK-specific regulatory capital coverage went from 2.8x to 5.1x to 2.0x between Dec-10/Jun-10/Dec-11 - no idea what to think about that!

Interesting post-script in light of the multiple moves on Boardroom diversity (or "gender diversity" as it might as well be called) is that they have ticked off a couple of boxes with a new NED hire. As I recall they have committed to a gender-specific target by 2014-15, and this obviously gets them going. I'm certain the 30% club might like to see more executive directors however... 

Late Post-script - Annual Report and Accounts and Annual Review and Summary Financial Statements published at the end of March contains all the ORSA-related disclosure materials one could want (p74-88)

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