Market Update - February 2008

2007 was without doubt a difficult year for many investment markets, particularly over the second half of the year as the global credit crisis began to take hold and previously specialist terms such as sub prime became household phrases.

For more information on market conditions >>

2007 Bonus Declarations ... So far

We are still in the early stages of the bonus season with many major life offices still to declare their bonus rates. What we have seen so far though is very encouraging with funds such as Friends Provident and Standard Life producing strong results and a mixed declaration from Clerical Medical and Norwich Union.

For more information on 2007 bonus declarations >>

The Future

We are seeing a real polarisation amongst life offices with the strong getting stronger. The practical impact is that, despite strict new solvency rules from the FSA, strong life offices can maintain and even grow equity proportions in the long term. All previous logic states that in the medium to long term equities will out perform other asset classes and so the higher the equity content the stronger the long term prospects

For more information on the future of the with profits market >>

Summary

After 4 consecutive strong performing years for with-profit funds the general market volatility and uncertainty led to lower returns for 2007.  The returns so far though are still encouraging. The fund returns are higher than the growth in the FTSE and their strong reserves have allowed policy values to increase ahead of the actual rate of return.

Assuming that the underlying markets produce strong returns in the future, with-profit funds are very well placed to take advantage and to deliver returns ahead of the individual asset classes over the next 10 - 15 years.

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