Final Results
11 Février 2003 - 3:55PM
UK Regulatory
News Release
11 February 2003
LIFE OFFICES OPPORTUNITIES TRUST PLC
The investment objective of Life Offices Opportunities Trust Plc ("LOOT") is to
achieve long term capital growth from a diversified portfolio of with-profits
life assurance policies. The Trust, with net assets of �36 million, is managed
by SVM Asset Management (`SVM'), the independent Edinburgh based investment
boutique.
Results for the year ended 31 December 2002
Salient Points
* Net asset value per share 152.86p compared to 160.70p in 2001
* Assets underlying with-profits funds performed poorly although most have
reduced equity exposure and are less sensitive to market moves
* The Tiner review of life office regulation will leave the basic
with-profits structure unchanged but will change the way funds are managed
and improve the level of transparency
* Portfolio continues to be well placed and should benefit from asset growth
in the future.
For further information please contact:
Brian Moretta SVM Asset Management 0131 226 6699
Roland Cross Broadgate 020 7726 6111
.
LIFE OFFICES OPPORTUNITIES TRUST PLC
Chairman's Statement for the year ended 31 December 2002
Commenting on the results, Chairman, John Brumwell, said:
"In 2002, your Company performed relatively well against an extremely difficult
background. Over the year, the net asset value per share fell by 4.9 per cent
to 152.9 pence. This contrasts favourably with a fall in the FTSE All-Share
Index of 24.9%. Part of this outperformance reflects the delay between changes
in assets and bonus declarations being made. As at 31 January 2003, the net
asset value per share was estimated at 139.8 pence. This allows for bonus
declarations up to 5 February 2003, including Standard Life. Approximately half
of the Trust's policies have had their new bonuses declared. The investment
objective of your Company is to achieve long-term capital growth and no
dividend is payable.
The portfolio comprises a spread of endowments, with an emphasis on life
offices we believed could benefit from the restructuring of the life industry,
much of which has already taken place. During 2002, no further policies were
purchased. However, advantage was taken of a temporary discrepancy between
surrender values and asset shares to surrender a small number of policies. In
addition, 38 policies matured as forecast and cash receipts were received from
a further 4 policies which terminated early. As I forecast last year, slightly
in excess of �1 million was received as a demutualisation bonus from Scottish
Provident.
For the third year in a row, the assets underlying with-profits funds performed
poorly. As in 2001, bonds and property offset the performance of equities.
Although equity weightings had been reduced, their poor performance meant that
with-profits funds again fell by around 10 per cent. Although 2003 has started
on a poor note as well, most offices now have much reduced equity exposure and
are less sensitive to market moves. However we have seen the consequences of
reduced capital in the industry as several companies, notably Pearl and
Scottish Equitable, have closed to new business.
The reduction of capital in the industry has again raised concerns over
solvency. The FSA have said that a FTSE level of 3500 is important for some
companies. This is not the level at which these companies become insolvent, but
at which these offices may have to take remedial action. Last Autumn, the FSA
published results of solvency tests on a realistic basis. These showed that
most of the large offices had a significant margin above their required
solvency levels, even with the market at current levels. Even Equitable Life,
for all its problems, remains solvent.
One consequence of the lack of capital has been a lack of restructuring
activity this year. While some companies have raised capital, notably Legal &
General and Friends Provident, there has been little corporate demand for life
offices. Both Britannic and Royal & Sun Alliance have tried and failed to sell
their life businesses. Until there is either a return to surplus capital or a
willingness from the stockmarket to fund purchases, it seems likely that
activity will remain slow in the near future.
Recently, the financial services industry has been the subject of several
investigations and several of these published results this year. The Sandler
review did not recommend the abolition of with-profits as some feared, but did
suggest that greater disclosure and a more transparent basis of calculating
surplus should be imposed. The Tiner review of life office regulation will also
leave the basic with-profits structure unchanged, but will change the way these
funds are managed and improve the transparency. Recently the FSA said it will
act upon most of these recommendations faster than expected, and we can only
hope that the results help restore confidence in the industry.
These are difficult times for the life assurance industry, but it has weathered
such storms in the past. While the current environment will obviously have an
effect on your Company, we do believe that the portfolio is well placed to
endure the current problems and should benefit from asset growth in the future
as policies approach maturity."
.
Life Offices Opportunities Trust Cont'd/*
Summarised Group Statement of Total Return
Year to 31 December Year to 31 December 2001
2002
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Gains on investments - (468) (468) - 2,731 2,731
Income 8 - 8 58 - 58
Investment - (414) (414) - (375) (375)
management fees
Other expenses (158) (276) (434) (115) (250) (365)
------ ------ ------ ------ ------ ------
Return before (150) (1,158) (1,308) (57) 2,106 2,049
interest and
taxation
Bank overdraft - (635) (635) - (569) (569)
interest
------ ------ ------ ------ ------ ------
Transfer (from) / to (150) (1,793) (1,943) (57) 1,537 1,480
reserves
====== ====== ====== ====== ====== ======
Return per ordinary (0.64p) (7.57p) (8.21p) (0.24p) 6.48p 6.24p
Share
.
Group Balance Sheet As at as at
31 December 31 December
2002 2001
�'000 �'000
Endowment policies 46,863 48,340
Net current liabilities (865) (5,255)
Bank loan (10,000) (5,000)
------ ------
Ordinary shareholders funds 35,998 38,085
====== ======
Net asset value per ordinary 152.86p 160.70p
share
.
Summarised Group Cash Flow Year to Year to
Statement
31 December 31 December
2002 2001
�'000 �'000
Net cash outflow from operating (833) (889)
activities
Interest / taxation paid (651) (563)
Capital expenditure and financial 937 (560)
investment
Financing 4,856 (511)
------ ------
Increase / (decrease) in cash 4,313 (2,523)
====== ======
Notes
1. Returns per Ordinary Share are based on 23,677,808 ordinary shares in issue
during the year (2001 - 23,700,000). The number of shares in issue at 31
December 2002 was 23,550,000 (2001 - 23,700,000).
2. During the year, the Company purchased for cancellation 150,000 ordinary
shares through the market for a total consideration of �144,000 at an average
price of 96 pence per share. The full amount has been set off against the
Special Reserve.
3. The above figures do not constitute full group accounts in terms of Section
240 of the Companies Act 1985. The accounts for the year to 31 December 2001,
on which the auditor issued an unqualified report, have been lodged with the
Registrar of Companies. The annual report and accounts will be mailed to
shareholders and will be lodged with the Registrar of Companies during February
2003. Copies will be available for inspection at 7 Castle Street, Edinburgh,
the registered office of the Company.
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