Insurance industry analysts say carriers look good this year but could suffer from problems with annuity and life insurance guarantees.[@@]

“The last 2 quarters were some of the easiest in this sellsider’s career, with very few negative surprises and most companies reporting results in line [with] or better than expectations,” according to a mid-year outlook by Jason Zucker, a securities analyst at Fox Pitt, Kelton Inc., New York, a unit of Swiss Reinsurance Company, Zurich.

Life company stocks are cheap, and a stronger economy could help the performance of companies with big group life and group disability operations, Zucker writes.

But Zucker warns against investing in companies that depend heavily on sales of variable annuities, partly because of worries about “emerging exposures related to the new variable annuity guarantee features.”

Insurance credit and financial strength analysts at Fitch Ratings, Chicago, today gave a similar assessment of the first half of the year today at a mid-year life industry outlook teleconference.

Fitch analysts are worrying about big life insurers’ exposure to fluctuations in the capital markets and to complicated, low-priced product guarantees, but they say the overall ratings outlook is stable because strong insurers will buy the insurers that get into trouble.

One trend is that a shortage of reinsurance is forcing life insurers to look for new hedging and securitization strategies to back product guarantees, Fitch analyst Doug Meyer says.

A large life insurer recently completed one life securitization deal, and many similar deals appear to be in the pipeline, Meyer says.

Meyer and a colleague, Julie Burke, also note that life insurers are talking more about acquisitions, mutual insurer mergers and acquisitions of blocks of business.

In the area of blocks of business, “there are a lot of opportunities out there right now,” Meyer says.