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Big five set to tighten grip on with-profits bonds

Five companies took two-thirds of with-profits bond business in 2002, up from half in 1999, says the Life 2003 survey.

Principal Ned Cazalet says the trend will increase as more than a third of companies, each responsible for generating at least £20m of direct sales last year, have stopped or are planning to stop actively writing new business.

The report shows that the top five players took 66.8 per cent of market share last year, writing £6.9bn in new business. Top-ranking Norwich Union is estimated to have written £2bn in new business, giving it 19.4 per cent of market share. It was followed by Prudential with 17.2 per cent, Standard Life at 12.9 per cent, Legal & General at 11.4 per cent and Axa with 5.9 per cent. The figures exclude overseas business.

Cazalet says the with-prof-its sector took a £150bn solvency hit from 2000 to 2003 but declared a total of around £50bn in bonuses.

Cazalet lists six insurers which have stopped writing new with-profits bond business and says some of those still writing business have harsh realities to confront, particularly with the drop in equity content and expected low returns.

He says: “It appears likely that, of the life offices writing with-profits business as at mid-2003, more will cease to do so, leaving some high and dry with regard to product offerings, which in turn is set to lead to more closures to new business.”

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