3 Insurance Stocks in Focus After BoE Rejects Relaxation in Capital Norms

4 min read | March 17, 2021 01:14 AM AEDT | By Abhijeet

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3 Insurance Stocks in Focus After BoE Rejects Relaxation in Capital Norms

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Summary

Bank of England Deputy Governor Sam Woods said capital requirement norms for insurance companies might not have any change after Brexit.

Association of British Insurers said £35 billion worth of captive capital was held up as risk margin.

The insurance industry was expecting Brexit would mean less cumbersome processes for companies.

Throttling industry expectations that the UK’s exit from the European Union (EU) would mean less cumbersome processes for insurers, Bank of England Deputy Governor Sam Woods on Tuesday said that though the rules are under review, it is unlikely that there would be any change in capital requirement norms.

Speaking at a session of the Association of British Insurers (ABI), Woods said that the Bank of England (BoE) did not wish to lower protection given to policyholders, but regulations would be tailored to fit the UK market and make the system more efficient.

He added the review process would take some time, and the detailed rules would be made a part of the rulebook for better functioning.

Also read: How COVID-19 hit private health insurance industry’s performance in 2020

Post Brexit, the government took up to review capital rule for insurances that were inherited from the EU. The insurance industry was hoping for some relaxation of rules. Last month, the ABI had said that as per the capital rules, as much as £35 billion worth of captive capital was held up as risk margin.

With no change in capital requirement norms, here is a look at three FTSE 100 insurance stocks

Aviva Plc (LON:AV)

In March, the company sold Aviva Italy for €873 million in cash. The company expects to get £5 billion in cash proceeds from the seven divestments it has announced as it would focus on strengthening its operations in the UK, Canada, and Ireland.

The company recently declared an operating profit of £3,161 million compared to £3,184 million a year ago. It reported £2,910 million as profit for FY20 against £2,663 reported in FY19. The company declared a total dividend of 21 pence in FY20 against 15.50 pence in FY19. A final dividend of 14 pence per share was declared for ordinary shareholder for FY20.

Also read: Court Directs Insurance Group to Compensate Irish Pubs for Pandemic Closures

With a market capitalisation of £15,365 million, the shares of the company were trading at GBX 393.70, up by 0.67 per cent on 16 March at 10:45 GMT+1.

Prudential Plc (LON:PRU)

The company reported $2,185 million profit for FY20, against $792 million in FY19. The board approved a second interim ordinary dividend worth 10.73 cents for each share. The company’s Asia business reported an adjusted operating profit of $3.7 billion, up 13 per cent in FY20 against 12 per cent a year ago.

Also read: An Insurance Stock Continuously Building Resilience for the Future Growth

CEO Amanda Blanc said that despite the threat to business due to Covid-19, its agents and distribution partners were using virtual tools to conduct business, and that was reflected in the good performance of its Asia business.

The shares of the company were trading at GBX 1,572.50, up by 1.78 per cent on 16 March at 11:02 GMT+1 and had a market capitalisation of £40,317 million.

Legal & General Group Plc (LON:LGEN)

The company’s operating profit for FY20 was at £2,218 million, as compared to £2,286 million in FY19. L&G said that three out of its five businesses delivered growth. It said that its profit after tax was down 12 per cent to £1,607 million in FY20, against £1,834 million in FY19, largely because of the impact of lower interest rates. It announced a full year dividend of 17.57 pence for each share in FY20, unchanged as of FY19 full year dividend.

Group CEO Nigel Wilson said that the company’s balance sheet was strong, with Solvency II coverage ratio remaining over 190 per cent currently. He said that the company delivered a robust and resilient performance.

The shares of the company were trading at GBX 289.60, up 0.91 per cent on 16 March at 11:17 GMT+1 and had a market capitalisation of £17,126 million.

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