The UK life insurance sector has reported a strong set of 2013 first half results despite the ‘sluggish' economy, Fitch Ratings has reported.
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.
David Prowse, senior director in Fitch's Insurance team said: "Underlying profits and cash generation are continuing to improve. 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."
The research said while chief executives 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.
In addition, it found major insurers are adapting well to factors including the Retail Distribution Review, gender-neutral pricing, and pensions auto-enrolment. This is in line with Fitch's expectations and there are no significant implications for credit ratings in the near term.
Solvency II is, in Fitch's view is also unlikely to have any significant impact on insurers' balance sheets or credit ratings in the next few years, due to the timescale involved in finalising and then phasing in the new rules.
Fitch added it intends to maintain its stable rating outlook for the UK life insurance sector, indicating that the vast majority of UK life insurers' ratings are likely to be affirmed over the next 12-24 months. Fitch's outlook assumes a continued, but weak, economic recovery in the UK, with modest GDP growth.
