jdf716 Jul 2016 01:08
JDf7 you asked about Aviva the last three posts are taken form IC and the article was dated 21/April 2016 so its not upto date but makes interesting reading all the same.
read the third one first
My view post Brexit is that insurers fall into the same category as banks, you may well have to wait a long time time for them to tick up Also Av Sp has been in decline for a while >>>>>>>> good news is that no one is shorting it .
Investors chronicle view is hold
BROKER'S VIEW:
For the UK life insurers, we focus on risk exposure to shareholder-backed business assets (largely annuities), rather than total assets which include unit-linked and with-profits funds. The UK life insurers' asset mix is broadly unchanged since the financial crisis: it remains heavily weighted in bonds (government and corporate bonds) to support its annuity and with-profit businesses.
L&G has increased its exposure to bonds as a result of increasing its focus on its annuity business, with reduced focus on its active funds. By contrast, Standard Life has reduced its exposure to bonds as a result of the disposal of its Canadian business (mainly annuities) in 2014.
Aviva's shareholders' assets are more diversified than its large UK peers, with 28 per cent in 'other'; mainly mortgage loans. Similarly, both Just Retirement and Partnerships' 'other' comprises equity release investments. L&G started to write equity releases from 2015, an alternative investment to bonds to support its annuity book. Note changes in asset mix in Aviva are partly contributed to the sale of its US business and Delta Lloyd, and the acquisition of Friends Life.
Prudential and Standard Life's bond portfolios have the highest weighting towards corporate bonds, whereas Aviva, Chesnara and Phoenix have the highest weighting towards lower-risk government bonds. Just Retirement, L&G and Prudential have the highest corporate bonds as a percentage of net asset value compared with other large life peers. This is because both Just Retirement and L&G have a higher business mix towards annuities, and similarly Pru holds a significant amount of corporate bonds for its US and UK annuity business and there is also a limited government bond market in Asia for Pru to invest in corporate bonds.
Although Partnership does not disclose its bond holding split, we expect it to be similar to Just Retirement, which holds a significant amount of corporate bonds along with equity-release mortgages to back its annuity book. However, the credit quality has worsened for some insurers. The exception is Prudential US, where its BBB and below corporate bond holdings remain higher than peers, but have reduced since 2008.
Analysts at Canaccord Genuity
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