AKG, the specialist provider of assessment, ratings, information and market assistance to the financial services industry, has released its latest UK Life Office With Profits Reports which provide a complete picture of the evolving with profits scene.
The 2023 series of reports contain analysis and assessments of 195 sub-funds within 64 funds from 21 firms that were active in the UK market at the start of January 2024. Key findings in the reports include:
Technical provisions
The amount of with profits business in-force remains considerable; the reports illustrating with profits technical provisions totalling over £210bn at the end of 2022. These had dropped approximately 15% from 2021 levels of £248bn (this figure includes a small element of double-counting due to reinsurance).
The significant fall over 2022 not only reflects the gradual decline of the with profits sector as historic business runs off, but also the increase in interest rates leading to lower liability values as valuation interest rates increase.
Net premiums earned
Measured by net premiums earned, the top 10 companies accounted for around 97% of the market in 2022 with Prudential continuing to dominate the market, with an increased 80% (2021: 69%) of net premiums earned, while Wesleyan and NFU both reported gains. Showing some resilience, the total market size in 2022 grew by 22% from £5.6bn net premiums earned in 2021.
Net claims incurred
Net with profits claims also increased in 2022; totalling £20.0 billion, up from £16.4bn in 2021.
Lead author of the reports and Chairman at AKG, Gary Bown, commented: “Despite the acknowledged evolution of the market in recent years, there’s still a huge amount of client money wrapped up in with profits funds and hence a significant universe of funds for analysis, either open or closed.
“Important industry issues, including the introduction of Solvency UK and Consumer Duty, along with ESG factors, are impacting on the operation of with profits funds. It’s vital that when client circumstances dictate, advisers, paraplanners and trustees put themselves in a position to adequately assess the market and make informed decisions via support from this type of output.
“Similarly, providers, those directly involved in the market or those with strategic interests in with profits, can ensure they are kept up to speed with key with profits fund dynamics via our reports.”
Having published the annual series for over 25 years, AKG’s UK Life Office With Profits Reports provide an independent and unparalleled with profits picture. At over 1,200 pages in length the reports are designed to assist advisers, paraplanners, trustees and other analysts in assessing the relative merits of specific with profits funds. Whilst providers can utilise the output to inform key with profits market intelligence requirements.
Each individual report provides information on the structure and operation of a provider’s with profits fund(s). It also highlights the various risks borne by with profits policyholders and concludes with AKG’s long established Ratings for: With Profits Financial Strength; With Profits Future Performance; and With Profits Transparency. A number of comparative industry-wide tables are also included, covering a range of key metrics.
To find out more about the reports visit https://www.akg.co.uk/purchase
