NU Online News Service, Jan. 28, 2005, 4:20 p.m. EST

A leading rating agency says it expects to downgrade as many life insurance companies as it upgrades this year.[@@]

Standard & Poor’s Ratings Services, New York, says, however, that it expects publicly traded carriers to see more credit rating upgrades than downgrades.

During a joint teleconference with Andrew Kligerman, an analyst with UBS Investment Research, New York, S&P issued a stable outlook for the industry as a whole in 2005.

Factors favoring strong industry performance include improved risk-based capital ratios, strong asset value due to reduced credit defaults and improved risk management through such tactics as variable annuity hedging, S&P says.

On the down side, S&P believes insurers offering no-lapse universal life insurance policies may be open to some risk to profits in 8 years to 15 years if interest rates remain close to current low levels.

Changes to actuarial assumptions proposed by the National Association of Insurance Commissioners, Kansas City, Mo., could increase AXXX statutory reserve requirements for UL policies with no-lapse guarantees, S&P says.

S&P also forecast firmer pricing for disability insurance and an increase in mergers and acquisitions.