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Another knock for UK insurers

Article By: ,  Financial Analyst
March 28, 2014 4:57 PM

Shares of UK insurers took something of a beating today (28th March) on the back of the latest news that the Financial Conduct Authority (FCA) is set to launch an investigation into policies sold in the past.

Those reports sent insurers plummeting earlier today but they’ve since rebounded somewhat, following a subsequent statement issued by the FCA. The statement does confirm that a review on the fair treatment of long-standing customers in life insurance is set to start in the summer.

The focus is said to be on exit charges within those policies, and whether they could prevent those long-standing customers from looking elsewhere for better deals.

By way of easing some earlier rampant concerns, the FCA stated that it is “not looking at applying current standards retrospectively – for example on exit charges”.

Still, at time of writing, Phoenix Group is down 13%; Resolution (down 8%), Aviva (down 5.3%) and Legal & General (down 5%).

Meanwhile, only last week, the knock on the sector was highlighted following plans announced by George Osborne during the Budget speech on 19th March, which is set to essentially eliminate the requirement to buy annuities at retirement.

Talk about a double whammy! The FTSE 350 Life Insurance Index has declined around 7% since last week, on the back of all of this.

Some have fared better than others…

Standard Life, for instance (currently down some 2.4%), has had something of a bounce-back following declines after the Budget speech.

That’s thanks to the UK-based insurer’s acquisition of Ignis Asset Management (owned by Phoenix Group) for around £390m (announced on Wednesday).

The move goes some way towards Standard Life’s ambitions to increase emphasis on its investment management business, which bodes well given the recent news flow. Expectations here are that there will be more such deals to come.

Nonetheless, while the FCA’s statement certainly helped and there’s potential for a further modest rebound, these combined events will likely continue to place some pressure on the sector for the time being.

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