LONDON Concerns over the impact of flood losses and speculation over the shape of consolidation in the sector are set to dominate first-half earnings next week from some of the country's largest life and general insurers.
Aviva and Royal & SunAlliance are expected to see headline operating earnings drop almost 8 percent and 14 percent respectively, on the back of heavy claims after floods hit Britain in June and July.
The insurance industry as a whole, already hit by windstorm Kyrill in January, could face flood claims of 3.3 billion pounds, according to some estimates. Aviva has said its flood bill alone adds up to 340 million for June and July.
Merger speculation will centre on Friends Provident. It announced plans to merge with Resolution RSL.L last week, but the deal has come under scrutiny since rival Pearl began building a stake in Resolution.
Analysts said Friends -- which published headline first-half numbers along with the merger terms and will release full numbers on Wednesday -- is set to face questions on the future of that deal and on other possible suitors.
Sources close to the situation said on Friday that Friends had held preliminary talks with Old Mutual before Resolution. Newspaper reports have said suitors eyeing Britain's smallest bluechip life insurer include Zurich Financial ZURN.VX.
FLOOD WOES AT AVIVA, RSA
At Aviva, where Chief Executive Andrew Moss will be presenting results for the first time since he took over last month, attention is set to focus on its general insurance unit.
Ten analysts polled by Reuters saw operating profit, on a European embedded value basis, at an average of 1.57 billion pounds compared to 1.70 billion a year earlier, as the fall in general insurance earnings overshadowed growth in life.
But its new business contribution in life is seen up 14 percent at an average of 402 million pounds, including U.S. insurer AmerUs for the first time since Aviva bought it last year.
RSA is also set to feel flood woes, with a 14 percent drop in operating profit, according to a Reuters poll, driven by a 33 percent slide in its underwriting profit.
But the company's dividend is expected to jump 41 percent to 2.46 pence per share. RSA said in March it planned to raise its interim dividend by at least inflation plus 35 percent, after the sale of its U.S. unit, which had dragged on its earnings.
M&A, SUBPRIME FOCUS AT OLD MUTUAL
London-listed Old Mutual is set to see operating profit dip 4 percent to 850 million pounds, according to a poll of seven analysts carried out by the company, as the weak rand and U.S. dollar once again hit earnings.
Analysts said interest would focus on Old Mutual's exposure to turbulence in the U.S. subprime mortgage market, as well as its appetite for acquisitions and disposals.
"Old Mutual does not have significant exposure to sub-prime through its U.S. life operation," Citigroup said in a research note. "However, improved disclosure around this issue could help Old Mutual shake off some of the negative sentiment."
Just over a year-and-a-half after it won the protracted battle to buy Sweden's Skandia, South Africa's largest insurer is also set to face questions over its M&A ambitions.
Beyond a possible interest in UK life insurer Friends, Old Mutual is set to be quizzed on the future of unit Nedbank (NEDJ.J), after a newspaper report last month said Standard Chartered (STAN.L) was in talks to acquire it.
"A sale of the Nedbank stake would cut South African exposure, reduce the complexity of the group, and could lead to significant capital repatriation, in our view," Merrill Lynch said in a note.