Life assurer and leading pension annuity provider, Legal and General, may delay a shift to MCEV reporting. They are expected to delay a move across to a new reporting measure that could have a negative impact on their balance sheets.
Legal and General was set to report its value under a more stringent European-wide measure known as market consistent embedded value (MCEV) at some point this year. It told analysts at an annuity briefing yesterday that the decision would be reassessed by the it’s board and possibly delayed.
The current method of financial reporting on an embedded value basis artificially inflates profit margins by not taking into account the full cost of capital. Under the new standards, a life company’s valuations and it’s profits are expected to be lower.
Companies with large books of pension annuity business such as L&G will be hardest hit by the change to MCEV, which will be the required financial reporting standard for all European insurers by the first quarter of 2010.