Moody’s Investors Service has upgraded its outlook for the U.S. life insurance industry to stable from negative.

The outlook signifies the direction Moody’s expects the industry’s financial strength will take over the next 12 to 18 months.

After a substantial number of downgrades in the previous 2 years, about one-third of the life insurers rated by Moody’s still have negative outlooks, analysts at the firm write in a new report.

But improvements in the economy and in the stock market have helped lift companies’ variable annuity portfolios as well as pension and asset-management fees, while reducing corporate defaults and bond downgrades and reversing investment losses, the analysts write.

“We expect that many companies’ outlooks will be returned to stable from negative over the coming months as these more favorable economic and capital market trends take hold,” the analysts write.

The improved outlook does not mean that all is rosy for the industry, the analysts write.

The industry will continue to suffer losses on commercial real estate loans and housing-related assets, and the economy could stall, the analysts warn.

To see what analysts at a competing firm, Fitch Ratings, Chicago, are saying about the life industry, please see Fitch: Life Insurer Outlook Improves.