Our thanks go to the firms which took part for kindly sharing their time and their insights. We hope you find the report useful and look forward to discussing the featured themes with you.
The output from this survey is relevant for everyone focused on the strategy and value of running with-profits businesses.
If you have any questions regarding this survey please contact one of our team.
Reviewing and changing investment strategy continues to be the most common area of focus for with-profits business with the impact from the market environment being a key focus for funds, specifically in relation to the high interest rate and high inflation environment. As part of our findings around investment strategy, we have observed that:
What is your approach for keeping your investment strategy relevant for your fund(s) given the macroeconomic environment, and in light of changing industry focus?
The FCA’s Consumer Duty requires firms to take reasonable steps to achieve good outcomes for consumers.
The requirements came into force on 31 July 2023 for new and existing products. Firms must comply with the requirements for closed books by 31 July 2024. It is clear this has been a focus for with-profits management and will continue to be as the 2024 deadline approaches for closed books. In fact, it seems the closed book deadline is potentially more impactful for many firms with with-profits funds than the deadline which has just passed.
As part of our findings, we have observed that:
When implementing Consumer Duty what are your specific considerations for with-profits business e.g. customer understanding of with-profits products?
The issue of goneaways continues to be an area of focus for with-profits funds, with some firms making an allowance for goneaway policies who are not expected to claim from both a reserving and capital perspective. Of the funds that make an adjustment for this in Best Estimate Liabilities, the most common approach is to apply an experience analysis type methodology on expected claims, though making an adjustment based on a range of factors (age, policy type, premium status, maturity date) is also used. Interestingly we noted very few companies making an allowance for goneaway policies in capital calculations, suggesting this is not a material factor in capital management.
How do you measure the materiality of your goneaway policies, both now and how do you expect this to change over time?
Finally, we have again sought to compare charges, expenses and payouts. The former being particularly relevant given that cost management continues to be a key focus for with-profits business, with streamlining existing processes and reducing costs of managing with-profits business being common areas of focus for with-profits business. Our key observations from this are:
