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Fitch: Negative Sector Outlook For UK Life Insurance in 2017
December 2, 2016 / 9:21 AM / 8 months ago

Fitch: Negative Sector Outlook For UK Life Insurance in 2017

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(The following statement was released by the rating agency) Link to Fitch Ratings' Report: 2017 Outlook: UK Life Insurance here LONDON, December 02 (Fitch) Fitch Ratings says threats to profitability from regulatory scrutiny into how insurers treat their customers and sustained low investment yields contribute to a negative sector outlook for UK life insurance in 2017. However, insurers' diverse businesses and strong capitalisation will help them to absorb the pressures they face and Fitch's rating Outlook for the sector is therefore Stable, indicating that most UK life ratings are likely to be affirmed over the next one to two years. Fitch expects the impact of Brexit on UK life insurers to be limited, given the industry's domestic focus and the likely regulatory equivalence between UK and EU capital requirements after Brexit. Most UK life insurers that operate in other EU countries do so via local subsidiaries and are therefore not exposed to a potential loss of passporting provisions. Full Solvency II (S2) reporting will begin in May 2017 and Fitch expects most UK life insurers to continue reporting strong capital positions. The new disclosures will quantify the impacts of transitional allowances, helping to improve S2 comparability between insurers across Europe. For UK life insurers, transitional allowances are most significant on legacy annuity business. S2 capital requirements for annuities have increased due to the risk margin for longevity risk, which has increased significantly as a result of low interest rates. However, many investors view the risk margin as an uneconomic capital add-on, and, when comparing S2 results, will not seek to strip out the transitional allowances that insurers are applying to offset the risk margin. Low yields do not weaken the capital position of annuity business under Fitch's Prism factor-based capital model and are not a direct threat to UK life insurers' ratings. Other UK life market themes Fitch expects in 2017 include an ongoing shift of the annuity market away from individual annuities towards bulk annuity deals, and increasing investment in alternative assets such as infrastructure, as insurers search for higher returns. The full report, '2017 Outlook: UK Life Insurance', is available at www.fitchratings.com or by clicking the link above. Contact: Sam Mageed Director +44 20 3530 1704 Fitch Ratings Limited 30 North Colonnade London E14 5GN Willem Loots Director +44 20 3530 1808 Ralf Ehrhardt Associate Director +44 20 3530 1551 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

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