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Rating Agency Still Negative About U.S. Life Industry

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NU Online News Service, May 13, 2003, 1:32 p.m. EDT – Moody’s Investors Service, New York, says it is maintaining a negative rating outlook for the U.S. life insurance industry because of the weak U.S. economy, weak stock markets and problems with bond defaults.

The rating agency set its outlook to negative in September 2002, and it now says it expects the negative credit trends to persist until 2004.

“Moody’s expects that the present harsh environment is likely to contribute to additional company-specific rating actions in the coming months,” the firm warns in an announcement about its decision to maintain the negative rating outlook.

U.S. life insurers also face long-term pressure to move to relatively risky asset-accumulation products, away from traditional, stable products, the firm contends.

But the rating agency says the U.S. life industry continues to benefit from adequate capital levels, predictable and profitable blocks of business, and, in most cases, conservative balance sheets.

“Investment diversification and the maintenance of adequate liquidity and sound capitalization will have a positive impact on a company’s rating,” Moody’s says.


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