Several British life assurers are seeking to delay new financial reporting rules that would sharply reduce their profits and valuations after pressure on their balance sheets from weak stock and bond markets.
Companies that write large numbers of annuity contracts such as Prudential, Legal & General and Aviva are likely to be particularly hard hit by the change, said analysts.
European life assurers plan to move to so-called market consistent embedded value, a stricter version of the standard they use to value in-force policies, by the end of next year, which would mean reporting under MCEV in spring 2010.
Some life assurers have pledged to report their 2008 performances under MCEV, with announcements on the restatement of their 2007 figures expected imminently.
But Denis Duverne, finance director of Axa, the French insurer, and chairman of the CFO Forum, a group of European finance directors spearheading the change, said some companies, believed to be based in the UK, that had vowed to adopt early, now planned to delay until 2009.
“The majority of CFO Forum member firms had expressed an intention to move early, in 2008, to MCEV. I believe that a number of firms have changed their intentions on that”, - Mr. Duverne told the Financial Times.
He added that at least one “significant UK insurer” had recently expressed concern to the CFO Forum about the effect of MCEV on the value of new policies.
However, he said no insurers had sought to push back the 2009 deadline. He added that Axa had never planned to adopt the standard early.
According to Andrew Crean, analyst at Citigroup, moving to MCEV would cut Aviva’s estimated UK new business profit this year by two-thirds, while Prudential and L&G would “suffer an almost complete eradication” of UK new business profits.
Citi projects that the change would cut the Pru’s UK new business profits this year from £292m to just £12m. L&G’s would fall from £343m to £17m.
People close to L&G - which updates on its annuity business today - and Aviva, indicated that they remained committed to restating their 2007 embedded value figures under MCEV early next year, indicating adoption for 2008.
Prudential has said it would report under MCEV for 2008, but provided no update.
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