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Fitch: Acquisitions May Stabilize Life Industry

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NU Online News Service, Jan. 15, 5:45 p.m. – Increased acquisition activity will be critical to the stability of the life insurance industry this year, according to a forecast from Fitch Ratings Inc., Chicago.

Ratings often rise when strong carriers buy weak carriers, Fitch says

Fitch has adopted a stable outlook for life insurers for 2003, but, “if consolidation . . . does not materialize as expected, Fitch will consider returning to a negative rating outlook,” the company warns.

The shaky economy has created the worst credit markets in more than a decade, a bear market for stocks, the lowest interest rates in more than 40 years and uncertainty about accounting issues, Fitch points out.

Fitch notes that life insurers also face intense competitive pressure and a shift in business mix away from traditional protection products to lower-margin products such as variable annuities and mutual funds.