A.M. Best Releases Report on Investment Environment for U.S. Life Health Insurers
01/12/10 09:55
Last week, A.M. Best Company issued a special report outlining its views on the investment environment for U.S. life/health insurers titled, “Mixed Signals: Has the Economy Begun Its Recovery?” A.M. Best believes that, despite signs of economic recovery, financial institutions’ loan portfolios have yet to generate the full measure of expected losses, and that same potential holds true for U.S. life/health companies.
A.M. Best states that as we enter 2010, it appears the deepest U.S. recession in decades is showing some signs of improvement. A.M. Best accepts the consensus view of respected economists surveyed in a report from the National Association for Business Economics, which states the U.S. economic recovery has begun. Credit spreads have narrowed
considerably for most asset classes, especially corporate bonds, non-housing related asset-backed securities and
agency mortgage-backed securities.
However, even though some pressure on life insurers’ invested assets has alleviated, A.M. Best is maintaining its
negative rating outlook on the life/health industry, given its perspective on the credit cycle and the potential
negative impact on life insurance companies’ asset portfolios. A.M. Best’s view reflects concern regarding the
sustainability of the positive trends (i.e., the shape of the economic recovery), as well as the potential for volatile
equity markets and headline investment risk within commercial real estate as the credit cycle unwinds.
A.M. Best believes economic growth is likely to be moderate and that it will be several years before the economy
returns to “normal.” This belief is underpinned by the fact that unemployment is expected to remain at elevated
levels; there is continued potential for further deterioration in financial institutions’ loan portfolios; and there is
limited flexibility with respect to interest rates as they are at historical lows.
To order the report, please visit the A.M. Best Web Site at www.ambest.com
Tony Steuer, CLU - Life Insurance Consultant
Author: Questions & Answers on Life Insurance
A.M. Best states that as we enter 2010, it appears the deepest U.S. recession in decades is showing some signs of improvement. A.M. Best accepts the consensus view of respected economists surveyed in a report from the National Association for Business Economics, which states the U.S. economic recovery has begun. Credit spreads have narrowed
considerably for most asset classes, especially corporate bonds, non-housing related asset-backed securities and
agency mortgage-backed securities.
However, even though some pressure on life insurers’ invested assets has alleviated, A.M. Best is maintaining its
negative rating outlook on the life/health industry, given its perspective on the credit cycle and the potential
negative impact on life insurance companies’ asset portfolios. A.M. Best’s view reflects concern regarding the
sustainability of the positive trends (i.e., the shape of the economic recovery), as well as the potential for volatile
equity markets and headline investment risk within commercial real estate as the credit cycle unwinds.
A.M. Best believes economic growth is likely to be moderate and that it will be several years before the economy
returns to “normal.” This belief is underpinned by the fact that unemployment is expected to remain at elevated
levels; there is continued potential for further deterioration in financial institutions’ loan portfolios; and there is
limited flexibility with respect to interest rates as they are at historical lows.
To order the report, please visit the A.M. Best Web Site at www.ambest.com
Tony Steuer, CLU - Life Insurance Consultant
Author: Questions & Answers on Life Insurance
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