Equitable Life to increase capital distribution?

woolly_wombat

https://www.express.co.uk/finance/city/890544/Equitable-Life-Chris-Wiscarson-bonus-boost-customers

EQUITABLE LIFE wants to double the 35 per cent bonus its with-profits fund customers now receive when their policies mature or transfer out, chief executive Chris Wiscarson says.

He said the world’s oldest mutual life and pensions group, which was forced to close to new business and notoriously came close to collapse in 2000, is looking to boost returns to policy holders as it has enough cash to meet 220 per cent of its regulatory capital requirements.

It is sitting on £500 million of surplus cash.

When customers surrender their policies, they receive the higher of either the policy’s guaranteed value or surrender value plus 35 per cent.

Wiscarson said: “We could potentially double that [the 35 per cent bonus rate]. It depends on how we do it. Our strategic challenge is to increase the bonus rate quickly, without compromising the stability of the society.”

I'm sure Equitable Life with-profits policyholders do not need to be reminded that any 'guarantee' only applies on 'contractual termination' such as maturity, retirement, death or payment of an annuity.

woolly_wombat

The answer to the question is NO.

http://www.equitable.co.uk/media/57183/equ073_rplusa-2018-web-v4.pdf

ANNUAL REPORT AND ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2017

Chairman’s statement.......

It is evident from both the discussion groups and
our surveys that policyholders have a very strong
desire for stability in their fund values. It is clear
that there is no great appetite among policyholders
for an increase in capital distribution if that were
to lead to a greater likelihood of a reduction.

This consideration is very much in the Board’s
mind and we are pleased to confirm that capital
distribution in 2018 will be maintained at 35%.

The Strategic Report (pages 4 - 11) may be of interest.

In short, it appears that 80% of with-profits policyholders have a GIR (guaranteed investment rate) of 3.5% p.a. which persists beyond 60 and for which significant capital needs to be held back, and so the only way to return large amounts of capital to policyholders would be by 'eliminating the risks in the guarantees'.