LONDON--(BUSINESS WIRE)-- By putting an emphasis on improving capital efficiency, quality of earnings and generating cash, the UK life insurance industry is turning the corner after a period of financial upheaval. Full-year 2009 results and half-year figures for 2010 show a material improvement in International Financial Reporting Standards profits for most UK life companies.
The improvement, however, is only partially driven by better investment returns, as the percentage of the more profitable risk-type products (e.g., annuities and term assurance) fell more sharply than safer investment vehicles. Bulk-purchase annuity volumes, in particular, more than halved in 2009.
A salient trait of the UK market in 2009 was a steep drop—typically by double-digit percentage points—in new business volumes relative to 2008, with the reduction much more pronounced for groups with a sizable international portfolio.
Still, the capital position for most UK life insurance companies has been on the upswing from its lowest point 18 months earlier. Moreover, lower new business strain from depressed business volumes and a less capital intensive product mix are feeding the improvements. In addition, cost-saving approaches, a sharper focus on the repricing of products and more selectivity on product-line commitments have created a better environment for UK life insurers.
In view of these facts, A.M. Best has revised its outlook for the UK life industry to stable from negative. Despite the significant challenges that remain, A.M. Best believes that most UK life companies are effectively increasing their focus on capital efficiency.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/bestweekreports.asp?rt=ir.
A.M. Best will host an Insurance Market Briefing on the state of the European insurance sector and London Market at the Grange St. Paul’s Hotel on Wednesday, 13 October, from 8:30 a.m. to 12:30 p.m., with a networking lunch to follow. There is no charge to attend this event. To register for the briefing, please visit www3.ambest.com/conferences/events/EventRegister.aspx?event_id=BRI062.
A.M. Best Europe – Rating Services Limited is a subsidiary of A.M. Best Company. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers.
A.M. Best Company
Oliver Herbert, +(44) 20 7626 6264
Carlos Wong-Fupuy, +(44) 20 7626 6264
Assistant General Manager, Analytics
Rachelle Morrow, +(1) 908-439-2200, ext. 5378
Senior Manager, Public Relations
Jim Peavy, +(1) 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
Source: A.M. Best Company