What workers really think of their employers' health and retirement plans.
CHICAGO, Jan. 23, 2013 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. Insurance, including Aviva plc (NYSE:AV), Genworth Financial Inc. (NYSE:GNW), ING Groep NV (NYSE:ING), WellPoint Inc.(NYSE:WLP) andUnitedHealth Group, Inc.(NYSE:UNH).
A synopsis of today's Industry Outlook is presented below. The full article can be read at
The economic uncertainty is making it difficult for life insurers to expand their customer base. In fact, insurers are struggling to even retain their existing clientele. Narrowed disposable income owing to high unemployment and huge credit card debt has made it difficult for Americans to invest in retirement products such as life insurance.
Moreover, the low interest rate environment is one of the major risks for life insurers at this point. Investment income remains weak as life insurers are experiencing low returns on fixed-income instruments. Also, low rates are spoiling life insurers' efforts to grow fixed annuities and universal life insurance sales.
In December, Fitch Ratings has affirmed the credit outlook for the U.S. life insurance industry at stable for 2013. This action was primarily based on the expectation of insurers' improved liquidity and balance sheet strength. Further, the rating agency expects the nagging low interest rate environment to restrict earnings growth of the sector.
On the other hand, interest in cheaper products to cover only basic risks has increased. As a result some life insurers have already gone back to the basics in order to escape financial and regulatory difficulties.
Currently, the life insurers with favorable Zacks Ranks worth considering are Aviva plc (NYSE:AV) with a Zacks Rank #1 (Strong Buy); Genworth Financial Inc. (NYSE:GNW) andING Groep NV (NYSE:ING) with Zacks Rank #2 (Buy).
The U.S. health care system is significantly dependent on private health insurance, which is the primary source of coverage for most Americans. More than half of the U.S. citizens are covered under private health insurers such asWellPoint Inc.(NYSE:WLP) andUnitedHealth Group, Inc.(NYSE:UNH).
Unfortunately, these insurance companies utilize a pre-existing condition exemption clause to control costs and maximize profits. In 2010, the historic healthcare reform legislation -- The Patient Protection and Affordable Care Act (PPACA) -- was passed by the Congress with the intension of making health care facilities more affordable, preventing private insurance companies from continuing with the pre-existing condition clause and at the same time bringing in 32 million more people under coverage by 2019.
However, the legislation has had many detractors who contested several of its stated benefits and considered it another entitlement program that the country can ill afford. Finally, in June 2012, the U.S. Supreme Court ruled in favor of the reform, rejuvenating the industry by removing major uncertainties. Obama's re-election further ensures a certain future to the law.
With respect to the individual mandate, which drew the most attention as it requires all uninsured Americans to purchase a minimum level of health insurance coverage, the Supreme Court ruled that individuals failing to buy health insurance will have to pay a tax fine, but forcing them to buy insurance will be illegal. Employers will also be fined if they fail to provide insurance coverage to their workers.
While the legislative overhaul brings more regulatory scrutiny for private insurance companies, the net negative effect is far softer than was initially feared. Also, the removal of this uncertainty is a net positive in its own right.
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