Ellis, Barbara
August 1993
Accountancy;Aug1993, Vol. 112 Issue 1200, p40
Trade Publication
This article discusses the life insurance policies in Great Britain. Developed as much by historical accident as by design, with-profits policies began primarily as life assurance vehicles. The policies guarantee to pay out a minimum sum assured either at maturity or on the death of the policyholder. A minority of companies set the guaranteed sum assured at the same level or a little above total premiums paid in over the full term. The eponymous profits are a share of any surplus the insurance company manages to produce in addition to the guaranteed sum. They are passed on to policyholders as bonuses. Reversionary bonuses are usually declared each year and irrevocably added to the sum assured. Terminal bonuses are bonuses that the company can choose to add when the policy matures. This final payout can be heavily influenced by the number of policies reaching maturity during the year. Company generosity tends to decline as the volume of maturing policies increases. The traditional arguments in favour of with-profits policies are the element of guarantee and companies' ability to dip into reserves to smooth out bonus payments in years of varying investment performances.


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