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COMMENTS

U.K. Insurers: Steering Through A Chaotic World

COMMENTS

U.S. Health Insurers' Credit Quality Will Likely Hold Up In 2021

COMMENTS

U.S. Property/Casualty Insurers Demonstrate Extraordinary Resilience During The Pandemic

COMMENTS

Solid Capital Levels Position U.S. Life Insurers To Withstand A Tough 2021

COMMENTS

The U.K. Treasury's Review Of Solvency II Ahead Of Brexit: Still A Waiting Game For Insurers


U.K. Insurers: Steering Through A Chaotic World

Although S&P Global Ratings anticipates that profitability at rated U.K. insurers will be dented in 2020 (as detailed in table 2 of the appendix) across the industry we expect profitability to normalize in 2021 and that the impact on ratings will be limited. There is still uncertainty regarding the evolution of the pandemic, and the U.K.'s abrupt switch to a bare-bones trade agreement with the EU from Jan. 1, 2021.

In our view, insurers' investment exposure to pandemic-fueled market volatility will remain their main source of loss. We regard insured losses from the pandemic in 2020 and 2021 as an earnings event for the industry, rather than a capital event. In September, the Association of British Insurers (ABI) estimated COVID-19-related industry losses for the U.K. insurance industry (excluding Lloyd's) would be £1.7 billion. Based on this, and ABI's industry data, we estimate that in 2020 pandemic-related claims--for example, for business interruption, travel insurance, and contingency type policies--could add 6%-10% percentage points to the loss ratios of non-life insurers (excluding Lloyd's and the London market).

Life insurers were relatively unaffected by pandemic claims. They received 7,000 COVID-19-related life insurance claims and paid out £90 million; this equates to about 0.04% of the total claims incurred by the life insurance industry in 2018, the latest year for which ABI data is available.

Despite an abundance of downside risks, U.K. insurers have proven their resilience during the first wave of the COVID-19 pandemic. Financial markets have also recovered significantly from the depths they reached in March and April 2020, blunting the impact on profitability and capitalization of their initial plunge. As a result, investment returns and the value of investments are unlikely to weigh materially on U.K. insurers' earnings or capitalization levels in 2020 or 2021.

As our key metrics forecasts in table 2 show, we expect top lines and earnings to recover during 2021-2022. That said, our assumptions remain sensitive to prolonged lockdowns and further disruptions in investment markets. S&P Global Ratings believes there remains a high degree of uncertainty about the evolution of the coronavirus pandemic. Reports that at least one experimental vaccine is highly effective and might gain initial approval by the end of the year are promising, but this is merely the first step toward a return to social and economic normality; equally critical is the widespread availability of effective immunization, which could come by the middle of next year. We use this assumption in assessing the economic and credit implications associated with the pandemic (see our research here: www.spglobal.com/ratings). As the situation evolves, we will update our assumptions and estimates accordingly.

Brexit remains a source of uncertainty--a basic no-tariff deal between the U.K. and the EU after the Brexit transition period ends on Dec. 31, 2020, may weigh on the country's economic recovery. We anticipate that outlook revisions, rather than widespread downgrades, would be more likely to occur within the U.K. insurance sector, in the event of a no-deal or bare-bones deal that may hinder economic recovery.

Material capital buffers and prudent investment exposures have helped insurers to weather the impact of financial market dislocations earlier this year, unexpected claims payouts, and weaker macroeconomic conditions. Discretionary dividend suspensions and debt raises have also helped shore up capital and liquidity positions.

S&P Global Ratings rates 14 U.K.-based insurance groups, of which 12 are rated 'A-' or higher and all but two have a stable outlook. This supports our view that creditworthiness in the market as a whole is stable. Most entities have robust capital buffers and solvency positions.

Chart 1

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Chart 2

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Trial By Storm For Property/Casualty Underwriters

We expect that the U.K. property/casualty (P/C) industry's overall level of profitability will be tested in 2020, undercut by storms, COVID-19 claims, financial markets volatility, and the recessionary environment. Profits in 2021 should be more resilient, despite ongoing uncertainty regarding the pandemic and the changes after Brexit. Insurers are likely to concentrate ever more closely on underwriting profitability.

Early in 2020, three storms occurred in quick succession: Ciara (Feb. 8-9), Dennis (Feb. 15-16), and Jorge (Feb. 28-29). The sustained periods of heavy rainfall caused widespread flooding across much of England and Wales, and flooded about 4,000-5,000 properties. It was a difficult start to the year for insurers, with significant flooding hitting large parts of the country. Early estimates of the claims from these events were around £360 million--we estimate that these events, combined, represent a 1-in-10-year event.

Chart 3

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Since then, the advent of COVID-19 has brought with it further bad news and additional claims for U.K. P/C writers. Most players have reported manageable short-term losses due to the pandemic. For example, at the end of the first half of the year, reported pandemic-related claims, net of reinsurance, totaled £195 million at Aviva PLC and £110 million at Royal & Sun Alliance Insurance PLC (RSA). Results from the Lloyd's of London insurance market aggregate those of more than 90 syndicate members. The market reported pandemic-related claims of £2.4 billion, adding 18.7% percentage points to its overall combined ratio of 110.4% in the first half of 2020. (Lower combined ratios indicate better profitability. A combined ratio of greater than 100% signifies an underwriting loss.) Lloyd's estimates that total losses will ultimately reach £3.0 billion, including further losses arising from event cancellation and credit. Hiscox Insurance Co., one of Lloyd's syndicates, reported a $232 million loss at the end of the first half of 2020.

COVID-19-related losses may lag, affecting more than just the 2020 results, because some policies written before the pandemic will remain on-risk into 2021 and any reported losses will hit insurers' results next year. In addition, the Prudential Regulation Authority's recent review on reserving and exposure management highlighted evidence that reserves were weakening before the pandemic. These factors, combined with the uncertainty and complexity of estimating ultimate losses connected to the pandemic may keep loss ratios for P/C insurers elevated in 2021.

The recent court ruling regarding the Financial Conduct Authority's (FCA) test case presented business interruption underwriters with an additional, if manageable, challenge. As of September 2020, RSA estimated that its extra costs, net of reinsurance, would be less than £85 million, or £104 million on a gross basis; Hiscox estimated that its extra costs, net of reinsurance, would be less than £100 million. The FCA's Supreme Court appeal hearing started on Nov. 16, 2020, and no decision is expected for some weeks. We believe the final ruling in favor of the policyholders will not dent the capitalization of those U.K. players affected.

Conversely, lockdowns and extended periods of working from home and social distancing have reduced car journeys by around two-thirds and are expected to result in lower motor claims. Home and property insurance claims will also decline because the reduction in unattended residential properties has led to lower burglary levels, supporting underwriting results.

The FCA's recent proposal on pricing of motor and home insurance policies may also compress margins, in the short term. The proposal would prevent insurers from gradually increasing renewal pricing to consumers over time (known as "price walking"). The FCA estimates that the policy would save consumers £3.7 billion over 10 years. However, we expect the market will react quickly to the changes by increasing prices on new business. This would limit the impact of the change on underwriting earnings and profitability, in our view. For the groups we rate that write U.K. home and motor business, these lines are part of diversified product offerings, which will reduce the impact on profitability further.

U.K. Life Insurers Will Endure, Despite An Abundance Of Downside Risks

We anticipate that U.K. life insurers will outlast the current environment without a deterioration in their capital and financial positions. That said, the industry could take an economic and financial hit from the combined effect of the COVID-19 pandemic and Brexit. The potential implications prompted us to revise down our estimated growth and profitability for the industry in 2020.

In 2019, the industry reported a record £43.8 billion in bulk annuities deals, after strong years in 2018 (£24.2 billion) and 2017 (£12.3 billion). As of the first half of 2020, buy-in and buy-out deals worth £12.6 billion had been written, mainly from three players: PIC Insurance Group Inc., Aviva PLC, and Legal & General Group PLC (L&G) (source: Lane Clark & Peacock LLP, "Pensions De-Risking Report 2020," October 2020) and we expect deals written by year-end to total more than £25 billion.

Although the U.K. equity release mortgage sector is only a small part of the overall life industry, it has also witnessed a resurgence in recent years. The sector has almost quadrupled in the past decade. It unlocked value of £3.92 billion in 2019, far higher than the £945.97 million it unlocked in 2009.

Chart 4

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Chart 5

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The U.K. Faces A Steep Climb To Recovery

COVID-19 has thrust world economies into an uncertain and tumultuous environment. The U.K. authorities have deployed a range of fiscal, monetary, and regulatory tools to mitigate the economic fallout of the nation's sharpest recession to date. We project that the U.K. economy will contract by 9.7% in 2020, before growth rebounds to 7.9% in 2021.

Modest growth expectations in 2022-2024 mean that the economy will operate below pre-pandemic levels until at least 2024. However, fresh restrictions to keep the emerging second wave of COVID-19 infections in check, combined with an abrupt switch to a bare-bones trade agreement with the EU in 2021, are likely to curb the recovery's momentum (see "Economic Research: The Second Wave And Brexit Will Test The U.K. Recovery," published on Oct. 1, 2020).

The shift to a new post-Brexit regime will occur when the economic recovery from the pandemic is still fragile. Our base-case assumption is that the EU and U.K. will negotiate a core free trade agreement similar to the one Canada has with the EU, and start trading under this new regime after the transition period ends. However, the onset of the pandemic has presented the U.K. government with more pressing challenges. It is not yet clear whether a favorable U.K.-EU trade deal will be negotiated in time.

Under our base-case scenario, we do not anticipate that U.K. insurers' business risk profiles will see major changes after the U.K. leaves the EU. Most insurers have already incorporated subsidiary companies within the European Economic Area (EEA) to facilitate their transitions to a post-Brexit world.

If we lowered the long-term sovereign credit rating on the U.K. then we would review whether the ratings on Aviva PLC, L&G Group PLC, and Prudential PLC were resilient to our sovereign stress scenario. If we lowered the long-term rating on the U.K., we could also impose additional capital requirements in our capital model because of the potential lower credit quality of insurers' bond portfolios. A sovereign downgrade could also have long- and short-term effects on financial markets, such as increased equity volatility and collateral requirements or reduced liquidity.

The U.K.'s FCA is also preparing for all scenarios related to Brexit to minimize disruption, such as allowing firms to continue to access U.K. and EU trading venues in the absence of mutual equivalence. Chancellor of the Exchequer Rishi Sunak announced on Nov. 9, 2020 that the U.K. would be granting a package of equivalence decisions to European Economic Area states, including the EU states. These will allow non-U.K. companies to operate in the U.K. immediately after the transition period--that is, when passporting ends on Dec. 31, 2020--without causing any disruption to their businesses.

That said, if no deal is agreed between the EU and the U.K., the long-term implications for the U.K. economy could threaten income levels, growth prospects, government finances, external financing prospects, and financial markets. These important effects may have ripple effects for the insurance industry, which is correlated with economic developments.

Chart 6

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M&A In The U.K. Insurance Industry Will Continue

The U.K. insurance market remains mature and developed, and most changes to it stem from major merger and acquisition (M&A) activity, or immediate disruptors.

In our view, the ongoing cost pressure, in a competitive environment, combined with the need for technological innovation and the search for synergies and economies of scale, is driving a surge in M&A in the U.K. insurance markets (see table 8 in the appendix).

A few smaller, bolt-on transactions have already taken place, or are being completed despite the pandemic and the fragile global economy. In addition, some large-scale transactions could yet take place in 2020, such as those involving Liverpool Victoria Financial Services Ltd., Aviva, and RSA. All these groups are either undergoing a strategic review of their operations or are in transactional talks with potential counterparties. For more information, see:

Most bolt-on acquisitions or disposals have a neutral effect on our assessment of an insurer's business risk profile and rating. Larger scale transactions are assessed individually.

The Pandemic Proved Capital Buffers Were Resilient

The U.K. insurance sector entered 2020 with healthy technical margins and robust capital positions. On Dec. 31, 2019, overall capital for our rated U.K. portfolio, measured using our capital model, exceeded the expected threshold for the 'AAA' level by 15%, the 'A' level by 35%, and the 'BBB' level by 67%. We forecast that the industry will continue to exceed these thresholds until 2022, but by a sparser margin.

When we compare U.K. life and non-life players, we see stark differences in the capital adequacy levels they maintain. At the 'AAA' level, life insurers held average redundancies of 24%, while non-life players held just 3%. Despite this difference, we consider the sector's capital buffers will be sufficient to withstand the fallout from losses related to the pandemic as well as Brexit and the macroeconomic disruptions resulting from these events over the short-to-medium term.

We applied a stress test to help us judge the resilience of U.K. insurers' capital positions. Under the scenarios we ran, we estimate that 40% of the U.K. insurance industry's capital buffer entering 2020 could be wiped out. Ratings migration was the largest single factor in consuming the buffer (see "Down But Not Out: Insurers' Capital Buffers Are Proving Resilient In The Face Of COVID-19, Sept. 22, 2020).

Chart 7

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Chart 8

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Chart 9

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Capitalization Appears Resilient Under Solvency II

The unprecedented turmoil in investment markets in 2020 had a knock-on effect on U.K. insurers' solvency positions. They remedied the impact, in part, by raising debt (see chart 11), and suspending dividend payments. In addition, global financial markets have seen a general recovery since March 2020.

Chart 10

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As the U.K.'s transition period comes to an end, the U.K. government has launched a review of the regulation: "Solvency II: Call For Evidence." It is soliciting industry participants' views on various areas of potential reform. This first stage of the process opened in October 2020 and will last until Jan. 19, 2021. We believe the U.K.'s ability to retain full equivalency with Solvency II will depend on how closely aligned the future U.K. regulatory regime will remain with the current framework and on the characteristics of the post-Brexit relationship between the U.K. and the EU.

Strong Credit Quality Preserves Insurers' Access To Debt Markets

U.K. insurers accelerated their issuance in 2020, partly to strengthen their levels of capital and liquidity in an uncertain environment. U.K. insurers issued £8.4 billion in debt between Jan. 1 and Oct. 31, 2020, up from £6.2 billion issued in 2019. Insurers in general benefit from high credit quality--only a few of our rated European insurers have outstanding debt rated 'BBB-' or below.

Chart 11

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Appendix

Table 1

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Table 2

Key Metric Trends At A Glance
Reported performance for 2018 and 2019 and S&P Global Ratings' forecasts for 2020 and 2021
2021f 2020f 2019a 2018a
Aviva Group
Gross premium written (mil. £) >28,000.0 >28,000.0 31,243.0 28,659.0
Net income (mil. £) >1,500.0 >1,500.0 2,663.0 1,687.0
Net combined ratio non-life (%) 97.0-99.0 97.0-99.0 97.5 97.2
EBITDA fixed charge coverage (x) >5.0 >5.0 9.4 6.1
Financial leverage (%) 30.0-32.0 32.0-34.0 33.6 35.0
S&P Global Ratings capital adequacy Very strong Very strong Excellent Very strong
Ecclesiastical Group
Gross premium written (mil. £) ~460.0 ~430.0 425.9 393.9
Net combined ratio non-life (%) 92.0-94.0 94.0-96.0 87.9 84.6
EBITDA Fixed charge coverage (x) ~4.0 ~0.0 3.3 4.7
Return on revenue (%) ~8.0 ~0.0 9.6 16.4
Return on shareholders' equity (%) ~2.0 ~0.0 9.5 2.5
S&P Global Ratings capital adequacy Excellent Excellent Excellent Excellent
Flood Re Group
Gross premium written (mil. £) ~36.0 ~35.0 34.0 32.0
Main levy income (mil. £) 180.0 180.0 180.0 180.0
Net income (mil. £) 80.0-90.0 80.0-90.0 110.0 110.0
S&P Global Ratings capital adequacy Excellent Excellent Excellent Extremely strong
Hiscox Group
Gross premium written (mil. $) ~4,400.0 ~4,200.0 4,031.0 3,778.0
Net income (mil. $) 150.0-200.0 (200.0)-(50.0) 48.9 117.9
Net combined ratio non-life (%) 95.0-97.0 100.0-105.0 105.7 94.8
Fixed charge coverage (x) >4.0 ~(5.0) 0.8 6.1
Financial leverage (%) ~30.0 ~30.0 26.9 27.6
Return on revenue (%) >6.0 (7.0)-(2.0) (0.6) 8.9
Return on shareholders' equity (%) >6.0 (9.0)-(4.0) 2.2 5.1
S&P Global Ratings capital adequacy BBB BBB BBB AA
Legal & General Group
Gross premium written (mil. £) >12,000.0 >12,000.0 15,203.0 13,253.0
Net income (mil. £) >1,400.0 >1,400.0 1,810.0 1,808.0
EBITDA fixed charge coverage (x) >8.0 >8.0 11.6 10.6
Financial leverage (%) <40.0 <40.0 36.7 38.7
Return on shareholders' equity (%) >15.0 >15.0 20.4 22.7
S&P Global Ratings capital adequacy Excellent Excellent Excellent Excellent
Liverpool Victoria Group
Life: PVNBP new business margin (%) >1.0 >1.0 1.0 1.0
S&P Global Ratings capital adequacy Excellent Excellent Excellent Excellent
Return on shareholders' equity (%) <1.0 <1.0 12.7 (0.2)
Net income (mil. £) <0.0 <0.0 151.0 (2.0)
Lloyd's
Gross premium written (mil. £) ~39,000.0 ~37,000.0 35,905.0 35,527.0
Net income (mil. £) ~2,000.0 ~0.0 2,532.0 (1,001.0)
Net combined ratio non-life (%) ~95 ~105 102.1 104.5
S&P Global Ratings capital adequacy Excellent Excellent Excellent Very strong
Fixed charge coverage (x) ~25.0 <0.0 27.5 (12.1)
Financial leverage (%) ~3.0 ~3.0 3.1 2.8
M&G Group
Fixed charge coverage (x) >8.0 >8.0 9.0 14.0
Financial leverage (%) ~41.0 ~41.0 41.0 5.0
Return on shareholders' equity (%) >10.0 >10.0 16.0 N/A
S&P Global Ratings capital adequacy Excellent Excellent Excellent Extremely Strong
NPA Insurance
Gross premium written (000s £) 12,360.0 12,000.0 6,427.6 6,555.6
Net income (000s £) 1,000.0 (1,500.0) 1,073.9 554.3
Return on shareholders' equity (%) 5.0 (7.0) 5.7 3.0
Net combined ratio non-life (%) 95.0 125.0 104.7 78.3
RSA Group
Net premium written (mil. £) ~6,400.0 ~6,300.0 6,417.0 6,470.0
Net combined ratio non-life (%) 94.0-96.0 93.0-96.0 96.7 98.3
EBITDA fixed charge coverage (x) ~10.0 ~10.0 9.1 10.1
Return on revenue (%) ~8.0 ~5.0 5.0 8.8
Return on shareholders' equity (%) ~8.0 ~5.0 3.9 8.9
S&P Global Ratings capital adequacy BBB BBB BBB BBB
Royal London Mutual Group
Net income (mil. £) 100.0-150.0 <0.0 225.0 (48.0)
Life new business margin (%) ~2.0 ~2.0 2.5 2.5
Total new business Margin (%) >1.5 >1.5 1.7 1.8
Fixed charge coverage (x) >4.0 <4.0 10.8 N.M.
St James's Place Group
Net income (mil. £) >140.0 >50.0 147.0 174.0
Reported surrender rates (%) ~4.0 ~4.0 4.0 4.0
Fixed charge coverage (x) >18.0 >4.0 19.0 22.0
Financial leverage (%) ~40.0 ~40.0 38.0 34.0
S&P Global Ratings capital adequacy Excellent Excellent Excellent Excellent
Scottish Widows Group
Gross premium written (mil. £) N/A >9,500.0 9,320.0 8,794.0
Net income (mil. £) 400.0 260.0 (21.0) 389.0
EBITDA fixed charge coverage (x) 5.9 4.3 1.8 5.1
Financial leverage (%) 38.3 39.5 37.1 34.5
Return on shareholders' equity (%) N/A >20.0 (0.7) 9.6
S&P Global Ratings capital adequacy N/A Excellent Very Strong Excellent
Unum Group (U.K. operations only)
Gross premium written (mil. £) 480.0 480.0 483.0 456.0
Net income (mil. £) >30.0 >15.0 75.0 14.0
Return on Equity (%) >6.0 >3.0 15.7 2.7
S&P Global Ratings capital adequacy Very Strong Very Strong N/A Very Strong
a--Actual. f--Forecast. N/A--Not applicable. N.M.--Not meaningful. Data as of Oct. 31, 2020. 2018 capital adequacy is as per old criteria nomenclature. Based on most recently published full analysis.

Table 3

Peer Group 1: U.K. Life Insurance Peers With Strongest FSRs Without Support
Company Name Legal & General Group PLC Aviva Group M&G Group Scottish Widows Ltd.
Sector Life insurance Life insurance Multiline insurer Life insurance
Financial strength rating AA-/Stable AA-/Stable A+/Stable* A/Negative
Holding company rating A/Stable A/Stable A/Stable N/A
Business risk profile Very strong Very strong Strong Strong
IICRA score Low risk Low risk Low risk Low risk
Competitive position score Very strong Very strong Strong Strong
Financial risk profile score Strong Strong Very strong Strong
Capital and earnings score Strong Strong Very strong Strong
Risk exposure score Moderately Low Moderately Low Moderately low Moderately Low
Funding structure score Neutral Neutral Neutral Neutral
SACP/GCP aa- aa- a+ a
Governance score Neutral Neutral Neutral Neutral
Liquidity score Exceptional Exceptional Exceptional Exceptional
Comparable ratings analysis 0 0 0 0
Support 0 0 0 0
*FSR shown is for Prudential Assurance Co. Ltd. FSR--Financial strength rating. GCP--Group credit profile. IICRA--Insurance Industry And Country Risk Assessment. N/A--Not applicable. SACP--Stand-alone credit profile. Data as of Oct. 31, 2020.

Table 4

Peer Group 2: U.K. Life Insurance Peers That Are Part Of Larger Groups And Have FSRs That May Benefit From Group Support
Company Name Scottish Widows Ltd. UNUM Ltd.
Sector Life insurance Life insurance
Financial strength rating A/Negative A-/Stable
Holding company rating N/A N/A
Business risk profile Strong Satisfactory
IICRA score Low risk Low risk
Competitive position score Strong Satisfactory
Financial risk profile score Strong Satisfactory
Capital and earnings score Strong Satisfactory
Risk exposure score Moderately Low Moderately Low
Funding structure score Neutral Neutral
SACP/GCP a bbb+
Governance score Neutral Neutral
Liquidity score Exceptional Exceptional
Comparable ratings analysis 0 0
Support 0 1
FSR--Financial strength rating. GCP--Group credit profile. IICRA--Insurance Industry And Country Risk Assessment. N/A--Not applicable. SACP--Stand-alone credit profile. Data as of Oct. 31, 2020.

Table 5

Peer Group 3: U.K. P/C Insurance Peers With Strongest FSRs Without Support
Company Name Lloyd's Hiscox Insurance Group RSA Insurance Group
Sector Reinsurance Reinsurance P/C insurance
Financial strength rating A+/Stable A/Stable A/Watch Neg
Holding company rating N/A BBB+/Stable BBB+/Watch Neg
Business risk profile Very strong Strong Very strong
IICRA score Intermediate risk Intermediate risk Intermediate risk
Competitive position score Very strong Strong Very strong
Financial risk profile score Strong Satisfactory Satisfactory
Capital and earnings score Excellent Satisfactory Satisfactory
Risk exposure score High risk Moderately low Moderately low
Funding structure score Neutral Neutral Neutral
SACP/GCP a+ a- a
Governance score Neutral Neutral Neutral
Liquidity score Adequate Exceptional Exceptional
Comparable ratings analysis 0 1 0
Support 0 0 0
FSR--Financial strength rating. GCP--Group credit profile. IICRA--Insurance Industry And Country Risk Assessment. N/A--Not applicable. P/C--Property/casualty. SACP--Stand-alone credit profile. Data as of Oct. 31, 2020.

Table 6

Peer Group 4: U.K. Life Insurance Peers With Less Diversified Or Specialized Business Risk Profile
Company Name Royal London Mutual Insurance Society Group St. James's Place PLC Liverpool Victoria Friendly Society Group
Sector Life insurance Life insurance Multiline insurer
Financial strength rating A/Stable A-/Stable BBB+/Stable
Holding company rating N/A N/A N/A
Business risk profile Strong Satisfactory Satisfactory
IICRA score Low risk Low risk Low risk
Competitive position score Strong Satisfactory Satisfactory
Financial risk profile score Strong Strong Strong
Capital and earnings score Very strong Strong Excellent
Risk exposure score Moderately high Moderately low Moderately high
Funding structure score Neutral Neutral Moderately negative
SACP/GCP a a- bbb+
Governance score Neutral Neutral Neutral
Liquidity score Exceptional Exceptional Exceptional
Comparable ratings analysis 0 0 0
Support 0 0 0
FSR--Financial strength rating. GCP--Group credit profile. IICRA--Insurance Industry And Country Risk Assessment. N/A--Not applicable. SACP--Stand-alone credit profile. Data as of Oct. 31, 2020.

Table 7

Peer Group 5: U.K. P/C Specialized Insurance Peer Group
Company Name Ecclesiastical Insurance Group Flood Re Ltd. NPA Insurance Ltd.
Sector P/C insurance Reinsurance P/C insurance
Financial strength rating A-/Stable A/Stable BBB/Stable
Holding company rating N/A N/A N/A
Business risk profile Satisfactory Satisfactory Fair
IICRA score Intermediate risk Intermediate risk Intermediate risk
Competitive position score Satisfactory Satisfactory Fair
Financial risk profile score Strong Strong Satisfactory
Capital and earnings score Very strong Very strong Satisfactory
Risk exposure score Moderately high Moderately high Moderately low
Funding structure score Neutral Neutral Neutral
SACP/GCP a- a- bbb
Governance score Neutral Neutral Neutral
Liquidity score Exceptional Exceptional Exceptional
Comparable ratings analysis 0 1 0
Support 0 0 0
FSR--Financial strength rating. GCP--Group credit profile. IICRA--Insurance Industry And Country Risk Assessment. N/A--Not applicable. P/C--Property/casualty. SACP--Stand-alone credit profile. Data as of Oct. 31, 2020.

Table 8

Examples Of Merger And Acquisition Type Transactions In The U.K. Insurance Market In 2020
Deal Type Anounced Date Target Name Acquirer Name Seller Name Announced Total Value (mil. £) Payment Type Deal Status Target Country ISO Code Acquirer Country ISO Code Seller Country ISO Code
1 M&A Oct. 23, 2020 Retail investment & personal investing business Fidelity International Ltd Legal & General Group PLC N/A Cash Pending GB GB
2 M&A Oct. 19, 2020 Central St Giles General Partner Ltd Alphabet Inc Legal & General Group PLC, Mitsubishi Estate Co Ltd N/A Undisclosed Proposed GB US
3 M&A Oct. 14, 2020 Tesco Underwriting Ltd Tesco PLC Ageas SA/NV 102.96 Cash Pending GB GB BE
4 M&A Oct. 14, 2020 Spectrum Communications Ltd M&G PLC N/A Undisclosed Pending GB GB
5 INV Oct. 13, 2020 Bernicia Group Ltd Legal & General Group PLC 75.42 Cash Completed GB GB
6 M&A Oct. 2, 2020 RSA Insurance Group plc Intact Financial Corporation and Tryg A/S 7,200 Cash Proposed GB CA & DE
7 INV Sep. 30, 2020 Pension Insurance Corp Group Ltd MP 2019 K2 Aggregator LP Swiss Re AG,IFS IV Ltd,Crest Success Ltd 472.12 Cash Pending GB KY
8 M&A Sep. 30, 2020 Rothesay Life PLC Massachusetts Mutual Life Insurance Co,GIC Pte Ltd Blackstone Group Inc/The N/A Cash Pending GB US
9 M&A Sep. 14, 2020 Three office properties/UK CLS Holdings PLC Aviva PLC 59.51 Cash Pending GB GB
10 M&A Sep. 11, 2020 Aviva Ltd Sumitomo Life Insurance Co,IPGL Holdings Ltd,TPG Capital LP/US (Fund: TPG Strategic Capital Fund LP) Aviva PLC 1,543.38 Cash, stock, and debt Pending SG GB
11 M&A Sep. 8, 2020 Aviva France SA Potential Buyer Aviva PLC 2,712.76 Undisclosed Proposed FR GB
12 INV Sep. 8, 2020 Grab Holdings Inc Prudential PLC,Private Investor,AIA Group Ltd 279.79 Cash Proposed SG
13 M&A Aug. 20, 2020 World Marine & General Insurance PLC/The Randall & Quilter Investment Holdings Ltd BHP Group Ltd N/A Undisclosed Pending GB BM AU
14 M&A Aug. 19, 2020 Inceptum Insurance Co Ltd Randall & Quilter Investment Holdings Ltd Syndicate Holding Corp N/A Undisclosed Pending GB BM PR
15 M&A Aug. 13, 2020 Britannia Consultants Services Ltd Global Risk Partners Ltd N/A Undisclosed Completed GB GB
16 M&A Aug. 5, 2020 Hastings Group Holdings PLC Sampo Oyj,Rand Merchant Investment Holdings Ltd 1,246.96 Cash Pending GB
17 M&A Aug. 4, 2020 Civil Service Healthcare Society Ltd Bupa Insurance Ltd N/A Undisclosed Proposed GB GB
18 M&A Jul. 22, 2020 Aegon office building/Edinburgh Mugunghwa Trust Co Ltd,Roebuck Asset Management Ltd M&G PLC 133 Cash Completed GB
19 M&A Jul. 16, 2020 Friends Provident International Services Ltd International Financial Group Ltd Aviva PLC 258.18 Cash Completed IM GB GB
20 M&A Jul. 16, 2020 Brolly UK Technology Ltd Direct Line Insurance Group PLC N/A Undisclosed Completed GB GB
21 M&A Jul. 1, 2020 Architas Multi-Manager Ltd,Architas Advisory Services Ltd Liontrust Asset Management PLC AXA SA 75 Undisclosed Pending GB FR
22 M&A Jun. 22, 2020 UK General Insurance Group Ltd Primary Group Ltd JC Flowers & Co LLC N/A Cash Pending GB BM US
23 M&A Jun. 19, 2020 Financial Guaranty Uk Ltd Unnamed Buyer FGIC Corp N/A Undisclosed Completed GB US
24 M&A Jun. 12, 2020 Liverpool Victoria Friendly Society Ltd Bain Capital LP 1,000 Cash Proposed GB US
25 M&A Jun. 12, 2020 Penguin Portals Ltd Potential Buyer Admiral Group PLC 500 Undisclosed Proposed GB GB
26 M&A Jun. 8, 2020 Fleet Place House M&G PLC Beijing State-owned Capital Operation and Manageme 100 Cash Proposed GB CN
27 M&A May. 27, 2020 Ascentrics Consulting Group Inc M&G PLC Royal London Group N/A Cash Completed US GB GB
28 M&A May. 26, 2020 36-46 St John's Road/Clapham Junction Unnamed Buyer Legal & General Group PLC 24.96 Cash Completed GB
29 INV May. 19, 2020 Bikmo Ltd Hiscox Ltd,Private Investor,Development Bank of Wales Plc 1.8 Cash Completed GB
30 INV May. 19, 2020 Pinnacle Financial Services Ltd/UK AmeriLife Group LLC N/A Undisclosed Completed GB US
31 M&A May. 1, 2020 Three logistics warehouses Aviva PLC Next PLC 107 Cash Completed GB GB
32 M&A Apr. 27, 2020 400,000 square meter logistics warehouse/Dutch Aviva PLC Euro-Rijn International BV N/A Cash Completed GB NL
33 INV Apr. 17, 2020 Kensa Group Ltd Legal & General Group PLC N/A Undisclosed Completed GB GB
34 M&A Mar. 27, 2020 GreyCastle Holdings Ltd Monument RE Ltd N/A Undisclosed Completed GB BM
35 M&A Mar. 23, 2020 Kingsbridge Group Ltd White Mountains Insurance Group Ltd N/A Undisclosed Pending GB US
36 M&A Mar. 20, 2020 Portfolio of six commercial assets/Netherland Aviva PLC Anbang Insurance Group Co Ltd 642.2 Cash Completed GB CN
37 M&A Mar. 18, 2020 Motor Gap Ltd Axia Capital Partners LP N/A Cash Completed GB US
38 M&A Mar. 12, 2020 20 Churchill Place/London Brookfield Asset Management Inc M&G PLC 300 Cash Proposed CA GB
39 M&A Mar. 6, 2020 Astra Aviva Life PT Astra International Tbk PT Aviva PLC N/A Undisclosed Pending ID ID GB
40 M&A Feb. 19, 2020 Sainsbury's supermarket/Hessle Supermarket Income Reit PLC ReAssure Ltd 34.21 Cash Completed GB GB
41 M&A Feb. 12, 2020 37,414 square foot building/Mayfair Hines Interests LP Aviva PLC N/A Cash Completed US GB
42 M&A Jan. 28, 2020 Office building 33 Colston Avenue/Bristol Topland Group Holdings International Ltd Royal London Mutual Insurance Society Ltd/The 9.79 Cash Completed GB GB
43 M&A Jan. 20, 2020 Sanctuary Buildings / London Legal & General Group PLC Hana Financial Group Inc 300 Cash Proposed GB KR
44 INV Jan. 8, 2020 ITS Technology Group Ltd Aviva PLC 45 Cash Completed GB GB
45 M&A Jan. 8, 2020 WMS Group Aviva PLC N/A Undisclosed Completed GB GB
M&A--Mergers and investments. INV--Investment. N/A--Not applicable. Source: Bloomberg.

Related Research

This report does not constitute a rating action.

Primary Credit Analysts:Tatiana Grineva, London + 44 20 7176 7061;
tatiana.grineva@spglobal.com
Robert J Greensted, London + 44 20 7176 7095;
robert.greensted@spglobal.com
Secondary Contacts:Simran K Parmar, London (44) 20-7176-3579;
simran.parmar@spglobal.com
Liesl Saldanha, London (44) 20-7176-0489;
liesl.saldanha@spglobal.com
Research Contributors:Ruchika Agrawal, Mumbai;
ruchika.agrawal@spglobal.com
Giulia Filocca, London 44-20-7176-0614;
giulia.filocca@spglobal.com

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