Fitch Ratings says in a new report that the UK life insurance sector has reported a strong set of H113 results despite the sluggish economy. Fitch’s rating outlook for the sector remains stable, indicating that the majority of UK life insurer ratings are likely to be affirmed over the next 12-24 months.
“Underlying profits and cash generation are continuing to improve,” says David Prowse, Senior Director in Fitch’s Insurance team. “This is no accident and it is not simply a side-effect of recovering financial markets. It is the direct result of stronger management discipline in three vital areas where some insurers had previously lost focus cost control, product mix and pricing.”
While CEOs continued to emphasise cash generation as the priority in their H113 results presentations, several also highlighted growth opportunities in emerging markets. In the long term, growth can be ratings-positive if it increases and diversifies earnings; in the short term, it can be ratings-negative if it puts too much strain on capital and cash.
The annuity market is shifting apace towards medically underwritten annuities (enhanced annuities) as customers become aware that they can shop around for a larger annuity based on their lifestyle or certain medical conditions. The likes of Aviva and Legal & General are now competing strongly with specialist providers such as Just Retirement and Partnership. Legal & General’s enhanced annuity sales more than doubled in H113.
Fitch is holding a teleconference to discuss the UK life sector, on Wednesday 21 August at 14:30 UK time. Fitch’s analysts will highlight the main points of Fitch’s publication and give some additional insights into the UK life market. There will be time for participants to ask questions.
