British life assurers have been hit by a slowdown in sales of some key products as the credit crunch hits customers’ willingness to save, according to analysts.
The largest companies in the sector, such as Aviva, report interim financial results over the next two weeks, and brokers predict sluggish sales of some types of life assurance policies as consumers grapple with wild swings in stock markets and a downturn in the housing market.
Ned Cazalet, an independent life assurance analyst, said: “When the news headlines are Trevor McDonald saying the FTSE reaches new heights, piles of money comes out of consumers’ pockets into savings products. When the News at 10 has a gloomy-looking chancellor and – shock, horror – markets crash, that does not do [much] for [long-term saving].”
Some consumers are paying off debts, while those looking for a home for their money can choose bank accounts paying high rates of interest. Investors and analysts also expect the dearth of housing transactions to hit sales of protection policies, often taken out with a mortgage.
Sales of investment bonds are also expected to have been hit hard by changes to the capital gains tax regime, which Mr Cazalet described as a “drive-by shooting” of insurance-based savings products. But, sales of annuities – contracts that promise to pay an income for life – and pensions, are expected to prove more resilient. Prudential is also expected to report a surge in sales of with-profit policies.
Nevertheless, the concern about sales comes at a delicate time for insurers, already grappling with falling equity markets.
On Friday, Munich Re, the second-biggest reinsurer, delivered a shock profit warning after substantial writedowns on its equity holdings.
Roman Cizdyn, an analyst at Blue Oar Securities, said: “If we have a 20-30 per cent fall in equities from these levels, people will be asking all of these companies . . . if they need to raise capital.”