The historic barriers between the different companies which comprise the financial services industry are breaking down. In order that organisations may prosper in the new environment the relationships between products, distribution and clients need to be understood. A theory is developed to explain the historic position and the dynamics of the current environment and indicate future trends. The conclusion is that successful organisations will be those which fully understand and specialise in a limited number of sectors, and those who start with a clientbase and a distribution system which will not inhibit the introduction of other distribution methods so that they can become multi-product and multi-distribution organisations. Finally, the paper explores the relationships between pricing policy and distribution by means of distribution chains to determine the point and degree of price sensitivity.

A brief description is given of some problems encountered in designing a model office program. The key to an effective and flexible model lies in the structure which the model imposes on the data. An example of a model used for research is described.

1.1 The principal motivation for this paper is our involvement in the valuation of pension benefits under the Family Law (Scotland) Act 1985 and the review being undertaken by the Pensions Management Institute Working Group on pensions and divorce. As a consequence of the introduction of the Family Law (Scotland) Act 1985, there is an explicit provision that pension benefits should be included as part of the matrimonial property in a divorce settlement. It will be clear from this paper that we have considerable doubts as to whether the present law is satisfactory; nevertheless it is difficult to argue that such an important item as pension rights should be disregarded in divorce. This however, is often the position in England, Wales and Northern Ireland.

The paper deals with the development of unitised with-profits business in the United Kingdom. The authors trace the recent history of these products and comment on the main reasons for their development. They also deal with corporate issues, including implications for policyholders and shareholders of different fund structures and different types of life office. Pricing and product development issues are also covered. Reserving issues including the range of valuation methods, statutory requirements and policyholders' reasonable expectations are explored. Finally the paper considers the actuary's contribution to the management of unitised with-profits policyholders' expectations.

The paper proposes a new way of assessing an investment manager's skill in the day-to-day management of portfolios. The authors argue that traditional investment performance measurement techniques, whilst appropriate for many purposes, do not provide the insights necessary to judge the skill of investment managers. To judge manager skill, it is necessary to consider the activity within the portfolio in terms of the purchases, sales and trades, and to determine the value added by that activity. The paper sets out a framework by which this analysis can be carried out and, by means of examples, indicates how the results can be interpreted. The paper also explores briefly a number of other issues such as the qualitative aspects of performance monitoring. In writing the paper, the concept of risk in various guises was never far from the authors' minds, and it is true to say that the meaning of risk in the context of assessing manager skill lies at the very heart of the paper.

We both started working in Spain at the end of 1991: one of us in a joint venture life company between a Spanish health insurer and a U.K. life office, and the other in an international actuarial consultancy.

At the time of writing this paper we can only claim in the region of “4 man years” of experience of Spain. Therefore we do not pretend to offer an authoritative view of Spanish insurance or pensions, or of its actuarial profession. Clearly such a text would be better prepared by Spanish actuaries, or other long-standing practitioners of the Spanish market.

1.1.1 The Bonus and Valuation Research Group of the Faculty of Actuaries began the work which eventually led to this paper towards the end of 1991. About this time there was considerable speculation that levels of maturity payouts on with profits policies might be significantly in excess of the level that could be justified by the actual investment earnings underlying the policies. The initial aims of the research group were to:

(a) examine this claim;

(b) consider to what extent overpayment, if any, could be explained by the smoothing methods that might have been used by offices; and

(c) examine the practical consequences of continuing to adopt those smoothing methods.