UK life insurers' exposure to Thames Water is 'minimal', Citi says

Analysts at Citi pointed out on Thursday that the UK life insurance sector's direct exposure to Thames Water was "minimal".

They estimated that it was in a range of 0.2-0.3% of Aviva, L&G and Phoenix Holdings's annuity portfolios and less than 0.5% M&G's.

Furthermore, most of that debt was held at the opco level.

"Zooming out, Utilities represent c.10%-20% of corporate bond portfolios and there could be some downward pressure from ratings migration here (especially from other water companies) but overall we note that UK life insurers have a strong track record of managing credit risk.

"While the fundamental impact appears manageable this is another potential area of investor concern for what is a credit geare subsector."