Final Results
March 02 2005 - 4:37AM
UK Regulatory
PRESS RELEASE - 2 MARCH 2005
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 �27 million, is managed
by SVM Asset Management (`SVM'), the independent Edinburgh based investment
boutique.
Results for the year ended 31 December 2004
Salient Points
* Net Asset Value per share fell by 4.6% to 117.8 pence reflecting the
continuing decline in life office bonuses
* Value of assets continues to lag the recovery in the financial markets as
life offices smooth returns
* Traded endowment policyholders seem likely to receive demutualization
benefits from the Standard Life. Further details aren't expected until 2006
* Despite strength of markets, bonus cuts have already been seen in 2005 and
this is expected to continue, but the scale is less as bonuses approach
sustainable levels.
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 2004
Commenting on the results, Chairman, John Brumwell, said:
"This has been a disappointing year. Net assets again declined due to bonus
cuts from life offices, with Standard Life in particular having two substantial
reductions. Over the year, the net asset value per share fell by 4.6 per cent
to 117.8 pence. The investment objective of your Company is to achieve
long-term capital growth and no dividend is payable.
Last year, I commented on the failure of the value of the assets to respond to
the upturn in financial markets. In particular, the lagged effects of returns
on bonuses as life offices smooth returns means that change in bonuses tend to
lag the underlying markets. These features have been repeated this year, but to
a lesser degree. Many life offices, having cut bonuses sooner, have had muted
bonus changes, but some others have declared more substantial cuts. It should
be noted that the payout figures are falling quicker than bonuses, as the
effect of prior cuts generally leads to a reduction in payouts even if bonuses
remain unchanged.
The portfolio comprises a spread of endowments, with an emphasis on life
offices we believe can benefit from the restructuring of the life industry. In
the wake of early statements from Standard Life, I predicted more restructuring
activity in 2004.
The events at Standard Life have been much commented upon. A proposal will now
be put forward in 2006 for the company to demutualise. The current assumption
being that the company will become a listed entity in the second half of that
year. It seems likely that traded endowment policyholders will receive
demutualisation benefits, subject to cut-off dates, though the amounts look as
though they will be substantially smaller than those talked about at the vote
in 2000. The timing will be important as the demutualisation will probably run
into the time in which significant numbers of policies start to mature. We hope
that Standard Life will provide more clarity on these issues, although it may
be into 2006 before the answers are known for certain.
The main takeover activity has been in the area of closed life funds. There
have been five significant deals this year, with some new companies entering
the market. The only deal which seems to have had a noticeable effect on
policyholders has been the takeover of Abbey by Santander. There, it seems the
existing management decided to do some "kitchen sink" provisioning in Scottish
Mutual to prepare the company for sale. This involved further substantial cuts
to both bonuses and surrender values. The FSA has issued a Consultation Paper
on closed funds, with particular emphasis on protecting policyholders and
ensuring they receive fair payouts. These proposals are encouraging and should
help ensure that policyholders in these funds, which now represent a
significant proportion of the market, get treated properly.
The final restructuring news has been on inherited estates. These have been
mentioned in FSA consultative papers, though no firm conclusion appears to have
been reached. Aviva appears to believe that it will get an attribution as part
of the process of merging its life funds. The last payout to policyholders from
this process, from AXA, was extremely small and while any payment will be
welcomed, it is unlikely to be significant.
As mentioned last year, several TEP market makers have withdrawn from trading
policies. In the summer, Beale Dobie, the Policy Advisors to the fund,
announced that they were withdrawing from market making. As they provide
services to several funds, they have kept a residual business, with access to
market data subcontracted. So far this has proved to be a satisfactory
arrangement and we expect this to continue.
The strength of the markets in the underlying assets has been supportive to the
funds. With Aviva achieving a return over 10% in 2004, it is clear that many
funds will have beaten their underlying assumptions. Despite this, bonus cuts
have already been seen in 2005 and, as I said last year, will continue. But the
scale of these will be much smaller than previously seen as bonuses approach
sustainable levels. In some cases, these have already been achieved. We do
believe that the portfolio continues to be well placed for these changes and
should benefit from asset growth in the future."
J C H Brumwell
Chairman
2 March 2005
.
Summarised Group Statement of Total Return
(unaudited)
Year to 31 December Year to 31 December 2003
2004
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Gains / (losses) on - 78 78 - (5,526) (5,526)
investments
Income 7 - 7 2 - 2
Investment management - (335) (335) - (351) (351)
fees
Other expenses (120) (224) (344) (131) (233) (364)
------ ------ ------ ------ ------ ------
Return before interest (113) (481) (594) (129) (6,110) (6,239)
and taxation
Bank overdraft interest - (753) (753) - (677) (677)
------ ------ ------ ------ ------ ------
Transfer from reserves (113) (1,234) (1,347) (129) (6,787) (6,916)
------ ------ ------ ------ ------ ------
Return per ordinary (0.48p) (5.24p) (5.72p) (0.55p) (28.82p) (29.37p)
share
.
Group Balance Sheet As at As at
(unaudited)
31 December 31
December
2004
2003
�'000 �'000
Investments 41,193 41,093
Net current liabilities (13,458) (2,011)
Bank loan - (10,000)
------- -------
Ordinary shareholders' funds 27,735 29,082
------- -------
Net asset value per ordinary share 117.77p 123.49p
.
Summarised Group Cash Flow Statement Year to Year to
(unaudited)
31 December 31 December
2004 2003
�'000 �'000
Net cash outflow from operating (674) (732)
activities
Returns on investments and servicing of (753) (680)
finance
Capital expenditure and financial 130 61
investment
------ ------
Decrease in cash (1,297) (1,351)
------ ------
Notes
1. The results reflect the adoption in the accounts of the 2003 Statement of
Recommended Practice (SORP) issued by the Association of Investment Trust
Companies.
2. Return per share is based on a weighted average of 23,550,000 (2003 -
23,550,000) ordinary shares in issue during the year. Capital return per share
is based on net losses during the year of �1,234,000 (2003 - �6,787,000).
Revenue return per share is based on the revenue loss after taxation for the
year of (113,000 (2003 - �129,000). The number of shares in issue at 31
December 2004 was 23,550,000 (2003 - 23,550,000).
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 2003,
on which the auditors 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 March
2005. Copies will be available for inspection at 7 Castle Street, Edinburgh EH2
3AH, the registered office of the Company.
END
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