TEXT-Fitch maintains stable outlook on UK Non-Life insurance; indicators weak

(The following statement was released by the rating agency)

Oct 02 - Fitch Ratings has maintained its Stable Outlook on the UK non-life insurance sector, even as fundamental indicators in the sector remain weak. The Stable Outlook indicates that the vast majority of UK non-life insurers' ratings are likely to be affirmed over the next 12-24 months.

"Key UK non-life insurance market indicators such as investment returns, current-year technical results and levels of reserve surplus remain weak," says Bjorn Norrman, Associate Director in Fitch's EMEA Insurance rating group. These conditions are factored into the individual ratings of Fitch's UK non-life portfolio.

Fitch expects earnings to remain under pressure for the next 12-24 months. Investment returns are likely to remain depressed. Reserve surpluses built up over previous years of higher pricing will soon be exhausted, in Fitch's view. In addition, current pricing remains inadequate for many products.

Fitch does not expect an imminent turn in the pricing cycle. 2013 should see modest price increases, but competition and the possible entry of naive capacity, i.e. capacity from relatively inexperienced new providers, could delay higher price increases. Over a longer period, a more favourable development is expected, as current returns are too low to satisfy shareholders.

Capitalisation in the UK non-life sector remains strong, despite the current challenge of earnings generation, and this is a key factor underpinning the majority of Fitch's ratings.

The report "2013 Outlook: UK Non-Life Insurance - Underwriting Discipline critical as Earnings Pressure Remains" is available at .

Link to Fitch Ratings' Report: 2013 Outlook: UK Non-Life Insurance

((Bangalore Ratings Team, Hotline: +91 80 4135 5898 Debanjali.Ghosh@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, Reuters Messaging: Debanjali.Ghosh.reuters.com@reuters.net))