Fitch Ratings: Insurance Insights — September 2012 Edition

Sep 24, 2012


Below is the September 2012 edition of Fitch Ratings’ “Insurance Insights” newsletter:


Insurance Insights


The Insurance Insights newsletter provides a monthly round up of Fitch Ratings’ special reports, industry trends and company research for the insurance markets. For comprehensive coverage of the insurance sector as it’s published, please regularly check the Fitch website for updates.


Featured Reports
Earnings Outlook Mixed for U.S. Life Insurers

Fitch Ratings believes insurers face an uphill battle in materially improving returns and earnings-based interest coverage metrics in 2012. While the impact of low rates has been manageable, the agency notes that flexibility to further reduce crediting rates will be more limited in a sustained low rate environment. Fitch Ratings anticipates modest improvement in industry profitability for the full year 2012. Results to date have been broadly in line with rating expectations, although the agency’s outlook recognizes uncertainties associated with the challenging macroeconomic environment. Ongoing low interest rates, equity market volatility, Eurozone debt crisis contagion risk, and the slow economic recovery are key concerns. Modest earnings improvement in 2012 for U.S. life insurers have been driven by active management of crediting rates on spread-based business, improved fee income driven by growth in assets, ongoing expense management, favorable investment results, and selected acquisitions.
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U.S. Property/Casualty Insurance – Sector Credit Factors

Fitch Ratings issued a sector-specific special report describing the credit factors the agency uses to analyze the U.S. Property/Casualty Insurance sector as a supplement to the global master criteria ‘Insurance Rating Methodology’. Companies in the Property/Casualty Insurance sector are evaluated considering various qualitative and quantitative credit factors, including but not limited to: industry profile and operating environment, market position and size/scale, corporate governance, capitalization and leverage, financial performance and earnings, and liquidity. Fitch Ratings has placed the various building blocks used to formulate its ratings within typical ranges to increase the transparency of its analysis. The report includes various median financial ratios by rating category, as well as charts that demonstrate how key qualitative factors can impact a typical rating range.
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Alternative Scenarios for the U.S. Economic Recovery

A persistent low-growth environment combined with weak consumer demand and business investment will negatively affect most corporate and U.S. public finance sectors, according to a Fitch Ratings report. Affected sectors include industrials, financial institutions, municipals and infrastructure. In its analysis, Fitch Ratings considers possible credit rating implications under three alternative scenarios for the U.S. economy over the next five years, consistent with its through-the-cycle approach to ratings. The three scenarios are: 1) a gradual improvement in U.S. GDP growth, 2) persistent low growth U.S. GDP, and 3) an oil price shock ($150/barrel prices). While immediate events are currently suppressing growth below the base case forecast proposed, the low case reflects a continuation of these current negative trends.
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*These reports are Fitch Research Premium Content and not available with a free registration or are available for a limited time to free registrants. Fitch Research is a paid service which features access to all current and historical ratings, exclusive research reports, and detailed bond surveillance. For more information about Fitch Research click here.

Insurance July 2012 Company Reports

Please note that the following reports are Fitch Research Premium Content.

Jul 27   Everest Re Group, Ltd. and Insurance Subsidiaries
Jul 24   Selective Insurance Group, Inc. (And Subsidiaries in the Selective Intercompany Pool)
Jul 19   Minnesota Life Insurance Company (A Subsidiary of Securian Financial Group, Inc.)
Jul 18   Zurich Insurance Company Ltd
Jul 16   AEGON Americas and North American Subsidiaries of AEGON N.V.
Jul 16   Aon plc
Jul 16   Primerica Life Insurance Company A Subsidiary of Primerica, Inc.
Jul 13   Teachers Insurance and Annuity Association of America and Subsidiary
Jul 02   Berkshire Hathaway, Inc. (And Insurance Subsidiaries)
Jul 02   Genworth Life Insurance Company (And Affiliates)
Jul 02   Infinity Property Casualty Corp. (And Insurance Subsidiaries)