David Worsfold
Mutuality in the insurance sector in the UK is seen as something of a minority pursuit after successive waves of demutualisation swept across the sector in the 1980s and 1990s. In fact, there are around 80 mutuals still operating in the UK with policyholders who paid £21m in premiums in 2015 and which manage over £172bn of assets.
According to the latest Global Market Share Report from the International Co-operative and Mutual Insurance Federation (ICMIF), in 2015 UK mutual insurers registered a 15.5% uplift in premium income, expanding their market share from 7.6% in 2013 to 8.0% in 2014 and up to 8.5% in 2015. This is still modest compared to many other markets.
Table 1: Market share of mutuals 2015 Top Ten
| Austria | 60.5% |
| Holland | 53.0% |
| France | 49.7% |
| Slovakia | 47.8% |
| Sweden | 47.6% |
| Germany | 47.0% |
| Norway | 46.7% |
| Denmark | 46.4% |
| Hungary | 42.8% |
| Spain | 40.4% |
Selected others
| Japan | 39.1% |
| USA | 37.7% |
| Paraguay | 29.6% |
| UK | 8.5% |
| Ireland | 1.9% |
The mix of business varies enormously from country-to-country with mutuals writing a wide range of business in most major markets as well as offering a range of annuity and investment products. They tend to avoid higher risk liability business, although may write workers’ compensation (employers’ liability). A
cross Europe, approximately 55% of mutual business is non-life, although that is boosted by the huge market shares the health insurance mutuals have in the Netherlands, Germany and Spain.
Because of the overall size of the UK market, when it comes to asset values, the UK is a significant force in the mutual universe.
Table 2: Total mutual assets by country 2015 
The UK ranks at seventh largest in terms of total assets. The top ten markets accounted for 92% of the global mutual sector’s asset values in 2015. Globally, the sector had a tough time in 2015 with an overall 6% decline in total asset values, making the UK sector’s modest 1.8% growth look respectable. That, of course, was on the back of strong premium growth.
Globally, just under 60% of mutual insurers’ total investments were held in bonds. Investments in equities accounted for 17.6% and a further 12.5% were invested in mortgages and loans. The remainder were split between real estate (1.6%), other short-term investments (1.6%) and other investments (7.1%) which includes derivatives and various undisclosed financial instruments.
Table 3: Breakdown of mutual assets globally 2015
Over the previous five years, there was a modest change in the asset mix in mutuals’ investment portfolios with a switch towards bonds. The proportion invested in bonds grew from 53.7% in 2011 to 59.5% in 2015. This was largely at the expense of investment in equities which dropped over the same period from a five year high of 20.6% in 2011. Mortgages and loans followed a similar trend with a lower proportion in 2015 compared to 2011 when it was 16.7%. In other investment classes, real estate and cash investments saw little change over the five years although the proportion declared as being invested in other assets jumped from 4.8% in 2011, likely indicating the growing interest in alternative assets from the insurance sector.
Not surprisingly, there are significant variations in this asset by country, as highlighted below.
Table 4: Investment breakdown of mutual assets across selected geographies 2015 
Japan and the USA are keenest on bonds, both investing over 70% in them. Mutuals in France and Canada (where they have almost 20% of the market) also held a higher share of bonds than the global average. By comparison, in Denmark, almost half of the mutual sector’s investments were in equities, while mutuals in Sweden, Australia and Germany all allocated over 20% of their total investment portfolio to equities.
One of the most striking anomalies is Germany where 1178 mutuals were operating in 2015. There, 49% of the sector’s aggregate investments were in mortgages and loans with bonds down to just 17%.
Australian mutual insurers had the highest proportion of real estate investments at just under 10%. Australia, along with Denmark and France, invested 10% or more of their assets in other miscellaneous asset classes.
Mutuality remains an important constituent in many countries and, collectively, a major player in the world of institutional investment. What the ICMIF report doesn’t capture is any sense of how mutuals’ investment policies might differ from the rest of the insurance sector, although it does talk in general terms about their social impact. It would certainly be interesting to know more about the broad investment polices of the sector, especially when it comes to equities, and whether it differs markedly from competitors.