With-profit returns hit by stockmarket woes

21 February 2008

The turbulence of stockmarkets in 2007 has hit Legal & General and LV= with-profit policyholders, with both firms revealing a slump in performance during the year.

The fall in returns has been seen across the with-profits sector, with Norwich Union and Scottish Widows also announcing falls.

L&G policyholders saw a return of 5% in 2007, down from 12% the previous year, while LV= funds achieved returns of 5.7% in 2007, down from 11.2% in 2006.

An L&G with-profits fund maturing on 1 March 2008 will achieve a maturity value of £44,966 while a policy maturing on the same date in 2007 made a return of £45,399.

For LV=, an endowment maturing on 1 March 2008 had a value of £61.625, down from the £63,905 achieved by the same product maturing a year earlier.

Mortgage endowments

However, both L&G and LV= mortgage endowments saw better results than some of their peers.

LV= has a mortgage endowment guarantee, meaning that all policies will be paid to meet the mortgage amount regardless of whether they are in shortfall or not.

The friendly society reports that a 20-year mortgage endowment policy will mature on 1 March 2008 with a value of around £71,388, a surplus of £21,388.

L&G, despite not having a mortgage endowment guarantee in place, reports that the number of policies at risk of a shortfall has fallen from 40% of its book to 28%.

A 25-year mortgage endowment policy maturing on 1 March 2008 from L&G will have a maturity value of £43,637, giving a surplus of £12,106.

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