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21 October 2015

'Battle of the Mutuals' 2014

UK Mutuals dominate the top of the UK Life Office ratings chart compiled by SL Investment Management (SL) this year, with Teachers Assurance claiming top spot, closely followed by National Farmers Union and Royal London. General Accident and Commercial Union move up to fourth and fifth positions respectively, with non-mover Scottish Widows retaining sixth place.

Full results can be found in SL's UK Life Office PRA Returns Analysis 2014. The top ten are as follows:

Position Life Office Change*
1 Teachers Assurance up
2 National Farmers Union up
3 Royal London down
4 General Accident up
5 Commercial Union up
6 Scottish Widows no change
7 Legal and General up
8 Weslyan Assurance down
9 Prudential Assurance down
10 Friends Life up

 *change based upon relative movement since SL report in 2013

The Prudential Regulation Authority (PRA), created as a part of the Bank of England by the Financial Services Act (2012), is the authority responsible for the prudential regulation and supervision of around 1,700 financial institutions in the UK. As part of this regulation, all UK insurance companies must publish a set of prescribed returns aimed at demonstrating compliance with regulation, continued solvency and how their underlying funds are split up.

When these returns are published in the second quarter of each year (for the 12 month reporting period ending the previous year-end), SL collates the data from over 30 of the Life Offices most prevalent in the UK Traded Endowment Policy market. Analysis is then performed in order to rank the Life Offices in terms of potential for future investment growth.

Actuarial Analyst at SL, Fred Bell, commented "It is very important to keep track of the information provided by the PRA returns each year with a view to distinguishing the Life Offices that are performing best at the current time and those that show the better prospects of improved future growth. SL reviews a great deal of data and allows for a multitude of figures (such as With-Profit Fund returns) and calculated ratios (such as Free Asset and Equity Backing Ratios) in determining the relative strength of a Life Office"

"Recent years in the financial markets have seen increased uncertainty, but with those times largely behind us and with the preparations for Solvency II in full force, the UK Life Offices are now in a much stronger position from a solvency stand point. Fixed and variable interest securities are held more prevalently at the investment grade (to provide more security) but with significant levels of equity that provide optimism of greater future growth".

This analysis provides further insights to the TEP market and follows on form SL's March 2015 paper With-Profit Endowments 2015.

For further insight please read our summary document UK Life Office PRA Returns Analysis. Alternatively, contact Fred Bell direct.