Market Insights UK 2011 INTERNATIONAL COOPERATIVE AND MUTUAL INSURANCE FEDERATION

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1 Market Insights UK 211 THE UK INSURANCE MARKET SHARE AS HELD BY MUTUAL AND COOPERATIVE INSURERS INTERNATIONAL COOPERATIVE AND MUTUAL INSURANCE FEDERATION N o 1/213

2 Total UK Premiums GBP millions 3, 25, 2, 15, 1, 5, Life Non-Life Source: Swiss Re, sigma No3/212, Statistical appendix, update January 213 Premiums written in UK 13.5% 4.5% 4.3% 27 The UK insurance industry was a different place in 211 than it was in 27 before the onset of the global financial crisis. Premium volumes were 28% lower in 211 than they were in 27, with negative annual growth rates in three of the last four years. The life sector had been hit by lower sales in unit-linked saving products following the removal of tax advantages, and a general lack of trust in the life insurance market following the global financial crisis. Conversely, non-life premiums showed some growth largely due to the rebalancing of motor business, which resulted in increased premium rates in 21/11. Turbulence in the financial markets, low interest rates and foreign business risks also had a negative effect on the UK insurance market. In 27, almost 96% of UK premiums were written by joint-stock companies, including 18% from insurers listed on the London Stock Exchange (both UK-registered and foreign companies). As the total market has shrunk since 27, premium volumes of listed public limited companies (plc) and joint-stock companies have decreased, by 12% and 34% respectively. However, there is one sector of the market that has increased premium volumes (+38%) since 27 and grown its share of the market: the cooperative and mutual sector. Cooperative and mutual (hereafter referred to as mutual ) insurers grew their share of the UK market from 4.3% in 27 to 8.2% in 211. Mutual premium income has shown robust growth year-on-year since 27, and stood at GBP 16. billion in 211, more than a third greater than in 27. The mutual sector has outperformed the rest of the UK market in each of the previous four years, with higher annual growth rates resulting in a growth in mutual market share. Premium Growth % 16.5% 4.8% 8.2% % % -9.5% -19.4% +37.9% Joint Stock 1 UK Plcs 2 Foreign Plcs 3 Mutual/Cooperative 1 Joint stock insurance companies not listed on the London Stock Exchange (includes UK subsidiaries of foreign-owned companies) 2 Insurance companies registered in the UK and listed on the London Stock Exchange as of 31 December 3 Insurance companies registered outside of the UK and listed on the London Stock Exchange as of 31 December

3 The majority of this mutual premium growth came from non-life business, where premiums had increased by 47% since 27, with double-digit annual growth rates in the last two years (211: +1.%; 21: +11.5%). Annual premium growth rates of the total non-life market in the UK remained positive since 27 despite the challenging economic environment, although average annual growth rates (+4.5%) were much lower than in the mutual non-life market (+12.2%). As a result, the market share of non-life mutuals increased by over 3% since 27, growing from 11.1% to 14.4% in 211. Life premium growth of mutuals since 27 was more moderate in comparison with the non-life market, yet life premiums in 211 remained 27% greater than in 27; despite a slight drop in mutual life business of 4.2% in the last year. However, the total life market has contracted by 39% since 27, with this decline having a dominant effect on the total UK market, as almost two-thirds of insurance business in the UK was written in the life sector. Life premiums showed recent signs of recovery, with the first positive growth in 211 (+.4%) for three years, although this was scarcely enough to offset the considerable premium decline seen in 28 (-27.1%) and 29 (-1.3%). Mutuals had a much lower penetration in the UK life market than in the non-life sector, although the mutual life market share has experienced a substantial growth since 27, growing from 2.5% to 5.1% in 211. The better-than-market growth of the mutual life sector over recent years resulted in a market share growth that exceded 2% in three of the previous four years, and despite a 5% fall in life market share in 211 (from 5.4% in 21), mutuals more than doubled their market share during this period. Premiums GBP millions Premiums GBP millions UK Mutual Premiums and Market Share 2, 15, 1, 5, 8, 7, 6, 5, 4, 3, 2, 1, 4.3% 5.7% 6.9% 8.% 8.2% % 3.7% 4.4% 5.4% 5.1% % 8% 6% 4% Market Share Life 6% 5% 4% 3% 2% Market Share Non-Life 1, 14.4% 15% The cooperative and mutual sector has been the fastest-growing part of the UK insurance market since the onset of the financial crisis. Premiums GBP millions 8, 6, 4, 2, 13.2% 12.6% 11.1% 11.2% % 9% Market Share

4 Non-Life The mutual non-life market was dominated by two classes of insurance: health and motor. Combined they contributed to 72% of non-life premiums written by mutuals in 211, with just under GBP 3 billion in health premiums written by mutual insurers (a 41.4% share of the mutual non-life market). The total UK health insurance market was estimated to be valued at around GBP 4.69 billion 1, giving mutuals a market share of 63.4%. BUPA Insurance is by far the largest non-life mutual - as well one of the largest non-life companies in the UK - and was responsible for the dominant position of mutuals within the UK health market; with Simplyhealth (premium income in 211 of GBP 314 million) and Western Provident Association (GBP 98 million) as the other main health mutuals. Motor premiums were not only the second-largest line of business written by mutuals in 211, but also the fastest-growing class of business. The 17.3% growth in motor premiums was the driving force in total non-life premium growth of +1.9%, with its share of the mutual non-life market increasing to 3.8% (from 28.7% in 21), and mutuals share of the UK motor market estimated at more than a quarter 2 in 211. The three largest motor providers- LV=, NFU Mutual and The Co-operative Insurance- held more than 9% of the mutual motor market, and all experienced double-digit growth in premiums in 211. This was reflective of the trend seen across the whole of the UK motor market which saw a growth in premiums as a result of hardening of prices to improve technical profitability. LV= grew new business sales in motor insurance with an increase in personal recommendations attributed to the mutual s high levels of customer satisfaction; while the growth in motor premiums by Co-operative Insurance could arguably be credited to the positive media coverage created by its new industry-leading telematics product aimed at young drivers. The rest of the mutual non-life market was composed of household and accident & liability premiums, both with shares of just under 1% of the total mutual market. Both product lines saw robust growth in 211 of 9.9% and 8.4% respectively, with the latter benefiting from increasing sales of professional indemnity policies by provident societies. The remaining 1% of the mutual market was made up of commercial property, marine and transport, and other classes of non-life insurance business. Premiums for commercial property, the only class of mutual business that saw a fall in premium volumes from the previous year, shrank by 5.5% in 211. Other 4.2% Marine, Aviation & Transport 1.% UK Mutual Non-Life Market 211 Accident & Liability 9.1% Commercial Property 4.2% Health 41.4% Household 9.3% 1 Calculation based on figures in European Insurance Key Facts, Insurance Europe, August net written premiums of motor insurance valued at approximately GBP 8,4 million, UK Insurance Key Facts, Association of British Insurers (ABI), September 212 Motor 3.7%

5 Life Like the non-life market, the mutual life sector saw two lines dominate its business. With a share of 45%, investment and savings business was the most dominant class of life insurance for mutuals. Premium income in investment and savings business dropped by 1%, as strong growth achieved by mid-size and smaller mutuals (mostly friendly societies) was offset by Royal London, with a small, yet market-significant, decrease in nonparticipating investment contracts. Traditional life insurance products made up 38% of the market, and saw little change in premium income in 211, with a slight drop in volumes of.8%. Many of the largest providers saw increased sales of life policies in 211, with growth for Royal London (helped by the acquisition of Royal Liver), LV=, Wesleyan Assurance Society and MGM Advantage, mostly in new and single premium business. Similarly, many of the friendly societies (such as Shepherds Friendly, Healthy Investment) with premium income of GBP 15 million and less, experienced a growth in premiums in 211. It was the mid-sized life mutuals (premiums of between GBP 15 million and GBP 1 million) which saw the greatest fall in traditional life sales in 211. Almost 15% of mutual life premiums in 211 were written in pension and annuities business, with a 6.6% growth in premiums from the previous year, while the remaining 2% of the life market was made up of other types of life policies. This part of the mutual life market saw the largest increase in premium income in 211 (+12.1%), with mutuals such as Wesleyan and Exeter Friendly Society experiencing healthy growth in income protection business. Other 2.% Life 38.4% UK Mutual Life Market 211 Investments/Savings 45.2% Pension 14.4%

6 Rank Company Gross Written Premiums GBP % Growth Royal London Insurance Group 1 3,51, 3,539, 2,989, -1.1% 2 LV= 2,533,2 2,149,5 1,545, % 3 BUPA 2 2,371,599 2,461,524 2,133,6-3.7% 4 NFU Mutual Insurance Group 1,278, 1,127, 1,161, +13.4% 5 The Co-operative Insurance 1,76,7 1,57,9 887,7 +1.8% 6 FM Global 3 795, , , % 7 Ecclesiastical 484,25 487, , % 8 Liberty Mutual 3 472, , , % 9 Groupama UK ,7 47,9 55, -3.2% 1 MGM Advantage 32, ,848 26, % 11 Medical Protection Society 318, , , % 12 Simplyhealth Group 314,5 317,1 327, -.8% 13 Wesleyan Assurance Society 277,1 211,1 175, % 14 Covea Insurance 3 (formerly MMA) 255,52 261,63 227,73-2.5% 15 Foresters Life 3 129,723 17,772 85, % 16 Scottish Friendly Assurance Society 129, ,621 9, % 17 Police Mutual 1,646 19,67 112, % 18 Western Provident Association 97,521 99,18 99, % 19 Equitable Life 76, 9, 183, -15.6% 2 Sunderland Marine 75,76 73,747 76, % 21 Benenden Healthcare Society 71,943 72,89 66, % 22 USAA 3 57,197 54,271 49, % 23 Exeter Friendly Society 56,545 55,96 55, % 24 Westfield Contributory Health Scheme 52,996 53, % 25 The Children s Mutual 5,312 55,382 6, % 26 Teachers Provident Society 47,828 49,742 53, % 27 Family Investments 45,441 5,858 57,22-1.7% 28 Reliance Mutual 42,822 52,239 56, % 29 engage Mutual 5 42, ,252 36, % 3 National House-Building Council 38,754 24,322 23, % ICMIF Members highlighted Indicates net written premiums 1 Includes premiums received in relation to non-participating and hybrid participating investment contracts 2 UK business only 3 UK subsidiary of foreign mutual 4 The non-life business of Groupama UK was acquired by Ageas on 14 November Premiums figures for 21 a result of a transfer of business from Ecclesiastical effective December 1 Largest UK Mutual Insurers 211

7 Largest UK Mutual Insurers 211 Total assets of the UK mutual sector were valued at GBP billion in 211, a growth of 5.5% in asset values from the previous year (21: GBP billion). Since 27, mutuals increased asset values in three of the four years, with only a drop of 2.8% experienced in 28 as the UK fell into recession and insurers investments were affected by falling stock markets. Long-term investment strategies employed by mutual insurers since 28 resulted in consistent growth in asset values, with annual average growth rates of 3.5%. Assets of the Mutual Sector , 135, 11,786 17, , , ,56 GBP millions 12, 15, 9, 75, Largest UK Mutuals by Total Assets 211 GBP millions Royal London Insurance Group 38,758 The Co-operative Insurance 25,99 NFU Mutual Insurance Group 12,31 LV= 1,283 Equitable Life 8,67 Wesleyan Assurance Society 4,789 BUPA 1 MGM Advantage Ecclesiastical Medical Protection Society 2,645 2,228 1,814 1,813 1 UK Non-Life business only

8 To view other ICMIF reports in the Market InSights series, please visit Market InSights: UK 211 The research team at ICMIF: Project Manager: Ben Telfer Editing: Faye Lageu and Shaun Tarbuck Report design: Iain Worgan Published February 213 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without prior permission in writing from the publisher. Copyright International Cooperative and Mutual Insurance Federation (ICMIF) 213 ICMIF Denzell House Dunham Road Bowdon Cheshire WA14 4QE United Kingdom Telephone: Fax: Shaun Tarbuck, Chief Executive The International Cooperative and Mutual Insurance Federation (ICMIF) is a best practice organisation committed to giving its members from around the world a competitive advantage. ICMIF helps to grow its mutual and cooperative insurance member organisations by sharing strategies and the latest market intelligence. ICMIF Market InSights reports are a series of market-specific reports compiled using the latest data from ICMIF s Global Mutual Market Share research, a market intelligence report on the size of the global mutual and cooperative insurance sector. Published annually alongside the ICMIF Global 5, a definitive list of the 5 largest mutual and cooperative insurers in terms of premium income, the report highlights how since 27 the mutual and cooperative model has been the fastest growing part of the global insurance market; maturing from a global share of 23.6% to 26.7% in 211. For more information please visit: