UK life insurance carriers steadied their footing in 2025, with capital generation and management discipline absorbing the shock of a record-breaking deal wave, KPMG's review of year-end disclosures from 15 firms found.
The firm’s April 2026 report showed Solvency II coverage ratios mostly held between 170% and 250%, a sign of resilience even as ownership across the sector changed hands.
Pension Insurance Corporation topped the peer group at 257%, ahead of M&G at 242% and Legal & General at around 210% on a pro forma basis. KPMG said movement in those ratios was driven mainly by acquisitions, dividends, buybacks and deleveraging rather than underlying trading.
Consolidation defined the year. Aviva closed its £3.7 billion takeover of Direct Line Group in July 2025, while Brookfield Wealth Solutions completed its £2.4 billion purchase of Just Group on April 1, 2026.
Athora Group sealed its £5.7 billion buy of PIC in March 2026, with PIC set to account for roughly 45% of Athora's total assets under management.
Other deals included Royal London's purchase of Dalmore Capital, Chesnara's £260 million acquisition of HSBC Life (UK), M&G's tie-up with Dai-ichi Life Holdings, and Standard Life's announced buy of Aegon UK in April 2026. Three mutual mergers were also unveiled, all targeted for completion in late 2026 or early 2027.
Slaughter and May noted in its Insurance Outlook 2026 that much of the UK life insurance M&A is being driven by private capital, with LCP flagging that three of the eleven insurers active in the bulk annuity market announced acquisitions by international investors in 2025.
Tighter competition translated into lower new business volumes and slimmer margins, with total new business Contractual Service Margin slipping versus 2024.
Rothesay's new business premiums fell to £5.2 billion from £15.7 billion, with new business profit dropping to £197 million from £886 million. Standard Life ran counter to the trend, lifting new business CSM to £408 million from £360 million and improving gross margins to 8.0% from 5.9%, the highest among peers.
Hymans Robertson's Lara Desay said only around £12 billion was transacted by insurers in the first half of 2025, against £48 billion for the whole of 2024. LCP attributed the pause partly to government surplus-extraction legislation, which is prompting larger schemes to run on rather than buy out, though the consultancy still expects 2025 volumes to top £40 billion.
Several insurers raised gilt allocations, citing more efficient risk-adjusted returns and lighter Solvency II capital strain. The Solvency UK reforms, in force since December 2024, introduced more flexible rules, including the Matching Adjustment Investment Accelerator, which the PRA finalised in October 2025.
The Bank of England has said the reforms should unlock at least £100 billion of insurer investment into UK productive assets over the next decade.
PRA stress tests in November 2025 confirmed sector resilience. KPMG also flagged growing focus on artificial intelligence at Aviva, Lloyds Banking Group and Royal London, alongside continued allocations to private credit and illiquid assets.
