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UK Life Assurance Overview 2005
Datamonitor, June 2005, Pages: 138
CHAPTER 1 - - INTRODUCTION 16.
What is this report about? 16
Who will this report be of use to? 16
How to use this report 16
Sources of Data 17
CHAPTER 2 - UK LIFE ASSURANCE 2005 REPORT 18.
How this briefing fits into the overall UK Life Assurance 2005 Product Suite 18
Report Methodology 19
CHAPTER 3 - INSURANCE PRODUCTS IN THE COLLECTIVE INVESTMENT MARKET 20.
Introduction 20
Key findings 20
The collective investments market has begun to recover following several years of decline 21
The structure of the UK life market has changed considerably over the last four years 22
The UK life related investmentmarket has declined by more than the unit trust and OEIC market 22
Tax advantages and commission rates of life-based investment products continue to make them popular with advisers and investors 23
With-Profits products were historically the mainstay of the life market 25
Single premium products have shown stronger recent growth than regular premium 26
The life-based investment market has been rocked by the collapse of With-Profits 27
The prolonged bear market has hit With-Profits Bonds hard 27
Insurers’ response to the equity downturn has added to the negative publicity 28
The decline of With-Profits has been partially offset by growth in Unit-Linked Bonds 29
The product performance of the remaining with-profit providers has generally been strong 30
Realistic reporting has tightened capital constraints for many with-profit providers 31
Sales of protection products have grown by a compound annual rate of 12% between 2000 and 2004 33
The strongest growth has been seen in the Term Assurance market 34
Sales of Whole-of-Life assurance have taken a nose-dive 35
Both stand-alone Critical Illness and with-rider sales have declined between 2000 and 2004 35
Income Protection sales have been relatively stable 35
CHAPTER 4 - MARKET CONTEXT 36.
Introduction 36
Key findings 36
Total life-related new business premiums fell by £632m between 2000-2004 37
The increased popularity of Unit-Linked Bonds has supported single premium new business 38
With-Profit Bond new business has collapsed since 2000 39
Unit-Linked Bond new business has grown by 6% 40
Other life bonds have grown increasingly popular among investors 41
Increased Term Assurance new business has supported regular premium new business 42
Term Assurance new business has been boosted by increased competition and re-mortgaging 42
Critical Illness new business has been driven by strong term-with -rider sales 43
Income Protection new business growth has been flat 44
Regular premium endowment new business has collapsed 45
CHAPTER 5 - DISTRIBUTION LANDSCAPE 46.
Key Findings 46
2004 saw IFAs increase total life-related new business levels for the first time since 2000 47
Strong single premium growth boosted IFAs overall new business levels in 2004 48
Bancassurers are increasing their share of the total life market 49
IFAs and bancassurers new business growth has come at the expense of the direct sales force channel 50
Bancassurers are closing the gap on IFAs in the single premium market 51
IFAs have turned to protection products and Unit-Linked Bonds to offset the decline in With-Profits 52
Bancassurers single premium new business growth has been driven by guaranteed equity bond new business 53
IFAs share of the regular premium market has fallen as they turned back to single premium products in 2004 55
IFAs’ regular premium new business has been hit by the improvement in the single premium market 55
The simple nature of regular premium products makes them well-suited for distribution via bancassurers 56
CHAPTER 6 - COMPETITIVE DYNAMICS 58.
Introduction 58
Key findings 58
The biggest life providers have been the least effected by the downturn in the life-related market 60
Large providers size and access to capital markets have helped them through tough market conditions 61
Mid-sized life company’s market share has increased despite the increasing competitive pressures 62
Smaller life companies lack of capital means they are struggling to survive 63
HBOS has established itself as the largest competitor in the UK life market 64
HBOS has been the only company to experience short and long term new business growth 68
Improving investment market conditions have helped insurers improve their free asset ratio 69
Only three providers have experienced positive long-term growth in new business between 1999-2003 72
HBOS has enjoyed strong growth in its single premium business 74
AIG’s business is dependent on single premium sales 77
Aviva’s single premium sales have declined sharply since 2001 78
Legal & General new business sales remain strong 81
Prudential has been hard hit by the decline in popularity of With-Profits 84
Standard Life has enjoyed strong single premium growth 88
Zurich Financial Services has been unaffected by With-Profits problems 90
Lloyds TSB has seen business decline across both single and regular premium products 92
A refocus on Unit-Linked business has boosted AXA new business 95
Abbey has experienced a collapse in its single premium sales 97
CHAPTER 7 - THE FUTURE DECODED 100.
Introduction 100
Key findings 100
Forecast assumptions for market size 102
Growth in the life related investment market is expected to outpace growth in the protection market 104
Total UK life new business premiums grow at 4% driven by single premium business 105
Single premium new business is forecast to grow at a rate 7% driven by strong Unit-Linked Bond new business 106
Unit-Linked Bond and ‘other’ bond new business growth will drive single premium new business 107
Single premium distribution: IFAs drive further growth within the single premium life market 108
Regular premium forecast: A cooling of the mortgage market will harm regular premium new business 110
A slowdown in Term Assurance new business will harm total regular premium new business 110
Regular premium distribution forecast: Bancassurers will be the only channel to enjoy a significant rise in new business premiums 112
CHAPTER 8 - APPENDIX 114.
Forecasting methodology 114
Regression analysis is unsuitable for Life and Pensions forecasting 114
Datamonitor uses a qualitative forecasting methodology for Life and Pensions 114
Supplementary data 116
Market contect of life-related products 116
Insurance products in the collective investment market 116
Distribution landscape 121
Competitor landscape 125
Forecasts 125
Definitions 128
Netted differences for IFA product attitude 128
SynThesys business line definitions 128
Single premium policy 129
Regular premium 129
New business 129
Life based investment products 130
Life Product Definitions 130
Single Premium Life 131
Annual Premium Life 132
ABI definitions of distribution channels 135
Further reading 136
SPP writing team 137
How to contact experts in your industry 137
How to contact experts in your industry 138
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LIST OF TABLES
Table 1: New business premiums in the UK protection market 2000-2004, split by product £m 34
Table 2: Life & General annuity new business sales and market share 1999-2003 61
Table 3: Total life & general annuity (excluding protection) new business premium income (APE) and market share for the top 10 competitors 1999 - 2003 67
Table 4: Free Asset Ratio (excluding future profits of the top ten competitors by premium income 1998-2003 70
Table 5: HBOS: New business premium income 1999-2003 74
Table 6: Life office breakdown of HBOS’s premium income 1999-2003 75
Table 7: AIG: New business premium income 1999-2003 77
Table 8: Aviva new business premium income 1999-2003 78
Table 9: Life Office breakdown of Aviva’s premium income 1999-2003 79
Table 10: Legal & General new business premium income 1999-2003 81
Table 11: Legal & General life office breakdown 1999-2003 83
Table 12: Prudential new business premium income 1999-2003 84
Table 13: Life office breakdown of Prudential’s premium income 1999-2003 85
Table 14: Standard Life new business premium income 1999-2003 88
Table 15: Zurich FS new business premium income 1998-2003 90
Table 16: Life office breakdown of Zurich new business premium income, 1999-2003 91
Table 17: Lloyds TSB new business premium income 1999-2003 92
Table 18: Life office breakdown of Lloyds TSB premium income, 1999-2003 94
Table 19: AXA new business premium income 1999-2003 95
Table 20: Life office breakdown of AXA premium income 1999-2003 96
Table 21: Life office breakdown of Abbey premium income,1999-2003 97
Table 22: Abbey life office new business premiums 1999-2003 98
Table 23: Life-related single premium new business 2001-2004 116
Table 24: Life-related regular premium new business 2001-2004 116
Table 25: FTSE and With-Profits bond new business 2000-2004 117
Table 26: Unit trust and life related savings new business non-APE 2001-2004 117
Table 27: Total With-Profits and Unit-Linked new business 2000-2004 118
Table 28: With-Profits and Unit-Linked Bond new business 2001-2004 118
Table 29: UK Life new single and regular new business 2000-2004 118
Table 30: Unit Trust/OEIC and life related savings new business 2001-2004 119
Table 31: With-profits (bonds & endowments) and all other life new business 2000-2004 119
Table 32: Investment fund returns by five year and ten year investment of £10,000 investment 120
Table 33: Savings and protection new business market growth 2000-2004 120
Table 34: Single and regular premium distribution 2000-2004 121
Table 35: Total single premium new business by distribution channel 122
Table 36: Unit-Linked Bond new business by distribution channel 2000-2004 122
Table 37: With-Profit Bond new business by distribution channel 2000-2004 123
Table 38: With-Profit Bond new business by distribution channel 2000-2004 123
Table 39: Regular premium total new business by distribution channel 2000-2004 124
Table 40: Top ten competitors single and regular premium Long term growth (CAGR) and short term new business growth 125
Table 41: Gross advances by purpose, 2000-2004e, £m 125
Table 42: Hard forecasting assumptions 2004-2009f 126
Table 43: Forecast total protection and total savings new business 2004-2009f 126
Table 44: Total single premium and annual premium new business forecasts 2004-2004 127
Table 45: Single premium new business forecasts by distribution channel 2004-2009 127
Table 46: Total regular premium new business forecasts by distribution channel 2004-2009 128
LIST OF FIGURES
Figure 1: Datamonitor’s UK Life Product portfolio, 2005 18
Figure 2: UK Life 2005 report methodology 19
Figure 3: Total equity savings market has recovered in 2004 as unit trusts, OEICs and Unit-Linked bonds experienced growth in new business premiums 21
Figure 4: There has been a small recovery in the savings side of the life market in 2004 22
Figure 5: Life related savings have fallen by more than unit trusts and OEICs 23
Figure 6: With-profit products share of total life investment and protection new business has declined dramatically since 2000 25
Figure 7: While single premium life products have picked up, regular premium life products continue to slump 26
Figure 8: With-profit bonds have failed to recover in line with the market 28
Figure 9: Unit-Linked bonds have become the key driver in the single premium market 30
Figure 10: Current 10 year With-Profits bonds have generally produced higher returns than the average UK managed fund 31
Figure 11: Sales of protection products grew by a compound annual rate of 12% between 2000 and 2003 33
Figure 12: A pick up in single premium new business has supported new business sales 37
Figure 13: Unit-Linked Bonds new business growth has helped offset the decline in with-profit new business 39
Figure 14: Term Assurance has been the only regular premium products to experience a growth in premiums 42
Figure 15: 2004 has seen IFAs increase their total life-related new business levels 47
Figure 16: Bancassurers are rapidly increasing their share of the life market 49
Figure 17: The size of the direct sales force channel has shrunk to less than one tenth of its previous size over the past ten years 51
Figure 18: 2004 has seen a recovery in IFA single premium new business levels 52
Figure 19: Bancassurers have increased their market share at the expense of all other channels 54
Figure 20: IFAs regular premium new business has fallen as they have increasingly turned back to single premium products 55
Figure 21: Bancassurers have increased their share of the regular premium market 57
Figure 22: Although the new business sales have contracted between 1999-2003, those of the top ten companies by sales have grown to be the largest segment in the market 60
Figure 23: The top ten competitors are taking an ever bigger share of the market 61
Figure 24: HBOS is establishing itself as the major life assurance provider in the UK> 64
Figure 25: While HBOS continue to dominate the life assurance market, Legal & General have now become the second biggest competitor 65
Figure 26: HBOS is the only company to experience strong short and long term new business growth 68
Figure 27: The average free asset ratio among the top 10 competitors has increased from 2002 69
Figure 28: The gap between savings and protection new business is expected to increase between 2004-2009 104
Figure 29: Total UK life new business is forecast to grow at a compound annual rate of 4% between 2004-2009 105
Figure 30: Single premium new business will be increasingly driven by Unit-Linked Bonds 106
Figure 31: IFAs are set to restablish their dominance of the single premium market 109
Figure 32: A fall in mortgage related new business will cause total regular premium new business to slump 110
Figure 33: The bancassurance channel will be the only channel to experience a growth in regular premium new business 113
Figure 34: “Quasi-Delphi” forecasting technique 115
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