The worst of Brexit is not over for insurers, with London-listed firms still seeing their share prices hit by the effect of the UK’s decision to leave the European Union.
While not as bad off as British banks, insurers are still exposed to international markets through their investments.
Aviva’s shares fell four per cent by 11am on Monday, following on from a 15 per cent fall on Friday after the results of the vote. However, the drop might be an overreaction from the market with analysists at Macquarie suggesting the slump reflects the
Aviva balance sheet of three years ago and that the company’s recent efforts to stabilise its business have left it in a good position to weather the Brexit storm.
In January, Aviva adopted an internal capital model to meet the Solvency II rules and has issued a statement saying its Solvency II coverage ratio remained close to the top of its working range of 150 per cent to 180 per cent.
In addition, according to a report in
The Telegraph, Canaccord Genuity has cut its share price targets for Legal & General and Aviva by a fifth. Other smaller insurance groups received less of a reduction from the financial services firm, largely because they are less exposed to the fall in global assets.
RBC Capital Markets analysts reportedly stated Legal & General were the most vulnerable to the Brexit, alongside bulk annuity firm Just Retirement Partnership. A period of economic uncertainty, low interest rates and low bond yields would decrease investment returns and make annuities less attractive to pensioners.
However, the Lloyd’s of London insurance market is expected to fare well through this period of uncertainty. A significant amount of its business comes from the US, so it is not as badly affected by the uncertainty surrounding EU trade regulations.
Related Stories:
Brexit impact strikes as QBE rocked by shares slump
IUA says London market will weather Brexit
