Insurer bonanza hopes
Saturday 25 February 1995
Hopes of a bonanza for shareholders sent life insurance shares soaring yesterday as United Friendly revealed it would allocate £275m of its investment funds to shareholders.
Hundreds of millions of pounds were added to the stock market values of other life insurers in the expectation that they would follow United's lead.
United's shares rose 86p to 605p, adding £70m to its market capitalisation. At one stage the shares had put on 112p on the previous day's close, before slipping back on profit-taking.
The £275m boost comes from unallocated profits in the company's £2bn- plus life fund. The money has been accumulated over the company's 75-year history as a result of a conservative distribution policy to its policyholders. Although the money left in the fund in any one year was small, it accumulated in value over the life of the fund to become significant today.
Although the shareholders' £275m stake will remain part of the fund, they will benefit from future investment gains and dividend returns from it.
Policyholders also benefit as the company is making a £72m special bonus payment to them. The big boost to shareholders follows an investigation into the fund launched nearly two years ago. A firm of actuaries went through the life funds' records to as far back as 1919.
United had expected the investigation to be completed by the end of 1993 but, at that stage, they were unable to satisfy the DTI about the value of the shareholders' stake.
Britannic Assurance rose 71p to 505p, adding £134m to its market capitalisation and Refuge Group 39p to 325p, adding £65m. Gains by other life insurers were more modest.
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