UK Life Insurance Rating :
Moody’s mention that they had changed their outlook to stable from negative for the UK life sector reflecting our expectation of stable earnings, conservative capital management and increasing income diversity from captive asset managers. This outlook expresses their expectations for the fundamental credit conditions in the industry over the next 12 to 18 months.
According to Moody’s service, The change in outlook of UK life insurance primarily reflects three factors,
- Their expectations of earnings stability supported by increasing cash generation.
- The industry’s strong and resilient capitalisation, which we expect to continue, sustained by conservative capital management.
- The strong performance of captive asset manager.
The profitability of the UK life industry is stable and supported by growing cash generation.
We expect theindustry’searnings to remain healthy overall, whilst earnings quality will improve given the focus on cash generation. The low interest-rateenvironment will gradually reduce profitability, but only marginally, given the industry’s relatively low sensitivity to interest rates.
Capitalisation has improved and we expect continued conservative capital management.
introduction of Solvency II, although postponed, has kept capital in check. Capitalisation has rebounded from its lows according to various capital metrics and is higher than pre-financial crisis levels. In addition the exposure to peripheral Eurozone investments is minimal.
Insurers are increasing their credit exposure to “new” asset classes, albeit in modest amounts thus far.
The retrenching of the banking system and the low interest-rate environment has meant that insurers are increasingly expanding their investment activities into the realm of banks. We believe that risks arise from the insurance sector’s often limited investment experience in these “new” assets and the need to develop specific expertise that companies might currently lack. »
UK economic growth remains weak, albeit long-term growth prospects for the UK life sector are strong.
The operating environment for UK insurers remains challenging, given the weak economic growth prospects and high level of household indebtedness, albeit some pockets of growth exist, particularly in the annuity and protection lines. We also expect long-term growth from the expanding pensioner population, and the continued lack of an adequate level of private pension provision.
The Profitability of the UK Life Industry is Stable and Supported by Growing Cash Generation.
Moody’s-Rated Life Insurers in UK
Issuer IFSR Rating Outlook
Aviva Life & Pensions UK Ltd Aa3 Negative
Clerical Medical Investment Group A2 Stable
Friends Life Limited A3 Negative
Legal & General Assurance Society Ltd Aa3 Stable
Prudential Annuities Ltd Aa2 Stable
Prudential Assurance Company Ltd Aa2 Stable
Prudential Retirement Income Ltd Aa2 Stable
Royal London Mutual Insurance Society Ltd A2 Stable
Scottish Amicable Insurance Fund Aa2 Stable
Scottish Life Fund A2 Stable
Scottish Widows plc A2 Stable
Skandia Life Assurance Company A2 Stable
Standard Life Assurance Ltd A1 Stable
Zurich Assurance Ltd A1 Stable
UK life insurance sector is enjoying stable rating now.