The U.K.’s Financial Services Authority (FSA) is reportedly confident that Australian insurer AMP will meet regulatory requirements concerning its U.K.-based Pearl life and pension operation.
According to a report from Reuters News Agency, FSA Chairman Sir Howard Davies in a TV interview expressed confidence that the company would “work their capital position through in a way that satisfies us.”
AMP’s troubles over Pearl have been going on for over a month. Around half of the company’s equity is invested in the venture, which has suffered, along with similar U.K. operations from the downturn in investment values. While “with profits” life and pension policies call for a guaranteed return to beneficiaries, companies are being increasingly hard pressed to earn sufficient amounts to meet their obligations. Regulatory authorities have therefore required additional reserves to assure payments. AMP may have to come up with as much as $700 million to do so, and has been negotiating with the FSA over the crisis.
Davies indicated that as long as the benchmark FTSE index remained above 3000 – it’s currently trading between 3700 and 3800 – Pearl had sufficient capital to support future claims payments. He also said that the FSA was continuing to work with companies, including Pearl, to assure a strengthening of their financial reserves to protect them from further falls in equity values, principally by shifting from stocks to bonds
In September the company’s shares dropped to an all time low of A$10.73 (U.S.$5.82), an instrumental factor in the resignation of CEO Paul Batchelor. His successor, Andrew Mohl, has indicated that restoring confidence in Pearl in particular and AMP in general his first priority.
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