Outlook for UK life insurance stable
The outlook for the UK life insurance sector has been changed to stable from negative, says Moody’s Investors Service in a new Industry Outlook published today. The outlook change reflects the rating agency’s expectation of (1) stable earnings; (2) conservative capital management; and (3) increasing income diversity from captive asset managers. However, these factors are counterbalanced by (1) potential short-term disruption from the Retail Distribution Review (RDR); (2) the risks posed by insurers’ expansion into “new” investment areas; and (3) the UK’s weak economic growth outlook for the next several years.
“The profitability of the UK life industry is stable and supported by growing cash generation. We expect that the industry’s earnings will remain healthy overall, whilst earnings quality will improve given the focus on cash generation,” said Antonello Aquino, Moody’s Senior Vice President and author of the report. “The low interest-rate environment will gradually reduce profitability, but only marginally, given the industry’s relatively low.