FTSE Insurers, Solvency II and Capital Adequacy - Resolution

There's enough disclosure in Resolution's releases today to choke a donkey, with preliminaries and slides full of the usual treats - this is probably the last of the major moheicans, so I'll probably do a round up post for my own benefit, though you can click through on the links on this post to get to the earlier ones.

On the Solvency II front they disclose £55m of project spend avec finance transformational costs, which is the same ball park as most competitors (L&G, Standard Life and Pru all within a couple of million). Their comment on p7 that "The current legislative draft looks less favourable for the UK industry with the treatment of matching premium and contract boundaries, in particular, being more onerous than the last quantitative impact study (QIS5) undertaken by the industry", feels like it pre-dates the ECON vote from last week, and they have comment scattered throughout on impact of Solvency II on capital management strategy, with-profits distribution and annuities. Some more substantial comment on project progress is on p63.

On the capital front, their disclosures are a little muddier than in their excellent analyst day presentation from last year which helps identify something approaching their "economic capital" measure (although this is not your conventional insurance business of course, and like Zurich, has an interesting major outsourcing angle). On p24 of that slideshow they look at Solvency II aggressively in the context of potential for cash returns, but no sign of that aggression today.

They also disclose in today's slides that they have already generated substantial capital savings through an optimisation programme (dividend-inspired rather that Solvency II-driven I dare say!)

FTSE results and spare capital - Legal and General

We must be entering the final straight in terms of UK disclosures (I think I've got most of them already) - L&G entered the fray today with their preliminaries, and had the following Solvency II-relevant items to disclose:

• IGD coverage of 220% - touch down on last year, but up in absolute terms from £3.7bn to £3.8bn - interesting that they declare it post dividend, unlike Prudential yesterday (the focus on how cash generative the L&G model is in their report might explain this relative flashiness!)
• Spend on Solvency II  (and other investment projects) up to £56m from £39m in the previous year
• "Countercyclical dampeners" highlighted as a key area in which L&G are engaged in the debate at EU level 

I may try and round these disclosures up into a nice table once the last few put their heads above the parapet.

FSA, SOLPRU and Costs

Just when you thought it had gone quiet, the FSA throw out a 200 pager covering the regulator's transposition to Solvency II!

Some important pieces in this on;

Cost

• FSA has budgeted £110m over the 5 years 2008-2013 for Solvency II implementation (which supports their statement back at a June FSA management meeting where they commented that contingency would need to be enacted (p3) if go-live date was extended past 2013). They had said in their business plan for this year that the estimated implementation cost would be £100m-£150m, so they are on the light side of that estimate. 
• Frighteningly, they are budgeting for another £178m of spend between 2014 and 2016 (on nursing internal models through assessments and  improving IT) before reverting to current equivalent levels - for those people who got a special levy refund this year, you might want to cancel the trip to Vegas!
• Estimating cost to the industry (of around 550-600 undertakings) of £1.9bn, with this estimate creeping up due to extra contractor and IT cost.

At 200 pages, some of the detail can wait, but those 2014-16 FSA costs (which will be the PRA by then I guess) are an eye opener, particularly for anyone in IMAP who will (possibly?) be coughing up a special levy for the model assessment-related element.