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Analyst Tells Analysts About Principles-Based Reserving

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A life insurance securities analyst told fellow analysts here that the future of life insurance company profitability looks bright.

Steven Schwartz, a senior vice president in the Chicago office of Raymond James & Associates, spoke here at the 11th annual insurance conference of the New York Society of Security Analysts.

The profitability of life insurers is improving, and it should improve even more if efforts to implement a more flexible “principles-based” approach to reserving succeed at freeing up some of the companies’ capital, Schwartz said.

Life companies have been improving returns on equity, Schwartz said.

The effort to update reserving rules “could certainly help ROEs if principles-based reserving works as it should,” Schwartz said.

Other Schwartz observations:

- The current discussion about regulation of indexed annuities is just “the camel’s nose under the tent” for broader discussions about suitability, Schwartz said.

- Life settlements are here to stay.

“They are going to affect the industry and pricing,” Schwartz said. “It is just a question of by how much.”


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