As a result of recent stock market uncertainties and as part of several efforts to reassure both present and prospective with profit customers Hibernian Life & Pensions has taken the initiative to launch a With Profit Charter – a first for a life and pensions company in Ireland.
As a result of recent stock market uncertainties and as part of several efforts to reassure both present and prospective with profit customers Hibernian Life & Pensions has taken the initiative to launch a With Profit Charter – a first for a life and pensions company in Ireland.
“With Profit business has had some bad press in recent months,” said Grant Barrans, managing director of Hibernian Life & Pensions. “Stock market volatility and an uncertain economic future have meant that all investment products have experienced difficult times, and with profit funds have been no exception. The charter is a way of setting in stone the commitment we make to our customers when they choose Hibernian to manage their money.”
The With Profit business is not as straightforward as other investment opportunities; its main advantage over other methods of savings is that it provides investors with the benefits of smoothing, together with valuable capital guarantees. Because customers’ money is invested in a wide range of assets including stocks and shares, but also in more stable options such as property, government bonds and cash, it means that the risk is not as high as it would be if the money was invested one hundred per cent in stocks and shares.
“In a nutshell a With Profit investment product is a way of putting into practice that old adage of not putting all your eggs in one basket - and in today’s economic climate that’s not such a bad idea,” said Grant Barrans.
The Charter specifically outlines how Hibernian’s bonus is paid and how the With Profit ‘smoothing’ process works. Smoothing is probably the key area where With Profit products are different to more straightforward investment products. The performance of assets underlying any investment can have good years and bad. The difference in a With Profit fund is that the ups and downs are smoothed out, some of the gains in the good years are held back to compensate for years in which the fund is not doing too well.
The Hibernian Charter clearly explains how the smoothing process works, and emphasises that all the returns are paid out in the long term. It also sets out the company’s principles regarding application of a Market Value Adjustment (MVA), which protects those in the fund from a stream of early encashments under poor market circumstances.
The Charter also guarantees that the With Profit fund is independent of all other Hibernian Life & Pensions business activity, ie it is ring fenced so that policyholders are not exposed to any business risks that the company may in the future be exposed to. There is also a commitment to disclose the Free Asset Ratio of the fund each six months in June and December.
This ratio shows by how much the assets of the fund exceed its liabilities and is a good indicator of the financial strength of the fund, over and above the solvency margin required by government legislation. Indeed the assets of the Hibernian With Profit Fund are well in excess of these strict government margins. The Free Asset Ratio is also an essential indicator for the financial adviser to assess if the fund is sound and if it is a safe recommendation for his or her clients.
Grant Barrans said: “I am certain that there are many policyholders and prospective policyholders out there who have perhaps been worried, not only by the recent bad press surrounding With Profit funds, but also by the continuing economic downturn. This Charter underscores the fact that prudent management of Hibernian’s With Profit Fund means that future Hibernian With Profit policyholders will not pay for the poor investment performance of the recent past. I believe this is an important message to get across to customers."
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Press contact:
Kela O’Riordan, 01 617 8164, 086 606 8842, kela.oriordan@hibernian.ie
Notes to editors:
- Hibernian is part of the Aviva plc, among the top five life companies in Europe, and seventh globally (based on gross worldwide premiums)
- Hibernian is Ireland’s largest composite insurer, ranked first for general insurance and top five for life and pensions
- A photograph is available by ISDN and a copy of the Charter in pdf format
- Hibernian news releases are also available on www.hibernian.ie