In a note commenting on Legal & General’s new business results released yesterday, KBW says L&G’s share price currently reflects a discount which reflects “the poor treatment of annuity writers under the current version of Solvency II proposals”.
But KBW says: “We see movement towards the final version of Solvency II which we believe will be far less onerous than currently being proposed.”
KBW says it nevertheless expects the bulk annuity market to be slow this year while uncertainty remains.
It says: “This market is experiencing improving demand, but it still remains slow as pension fund trustees continue to see their schemes in deficit, which we do not think L&G’s management will take too much advantage of due to recent increased competitive pricing.
“We are also of the view that a ’glide path’ approach between the Solvency I regime and the current onerous version of Solvency II, as highlighted by Aviva on its recent call, by the FSA could provide some inertia here.”