Close Close
Sign In
Newsletters
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Podcast Center Video Center Webcasts Resource Center Events
About ThinkAdvisor Contact Us Advertise With Us Asset & Logo Licensing Sitemap Terms of Service Privacy Policy Copyright © 2024 ALM Global, LLC. All Rights Reserved.
ThinkAdvisor

Life Health > Life Insurance

S&P Worries About U.S. Life Insurers

By Staff Writer

X
Your article was successfully shared with the contacts you provided.

NU Online News Service, Dec. 18, 5:09 p.m. – Poor investment returns and low interest rates will continue to hurt life insurer ratings, Standard & Poor’s, New York, predicts in its 2003 industry outlook.

U.S. life insurers were bruised by corporate credit defaults in 2002, and investment-grade bonds, which make up about two-thirds of the industry’s total investment portfolio, declined even more than in 2001, when the Enron scandal broke, S&P analysts observe.

The steep decline in interest rates since the end of 2000 is also taking its toll, squeezing the spread between what life insurers earn on their investments and the returns they have promised policyholders, the analysts add.

S&P says it expects these trends will continue to weigh down ratings, regardless of how well the equity markets do–although the markets were the strongest influence on the rating service’s downgrades of life insurers in 2002.

The report adds that a two-year stock slump turned guaranteed minimum death benefits into a “grim reaper” for insurers heavily involved in the variable annuity business and, at the same time, ate up the “phantom asset” known as deferred acquisition costs.

Still, the report points out, the life industry is among the highest-rated covered by S&P analysts, and the agency predicts life insurers will fare better than property-casualty insurers.

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.