Fitch: Life Insurers’ Margins ‘Under Pressure’

<p><location value="LU/us.ny.nyc" idsrc="xmltag.org">NEW YORK</location>--(BUSINESS WIRE)-- Operating returns for U.S. life insurers in 2011 have been in line with Fitch Ratings' expectations, according to a report published today. Annualized average operating return on assets, which excludes all realized gains and losses, was 1.29% at the end of the first half, compared with 1.31% for full-year 2010. These results are in line with 2009 returns but are well below 2008 and earlier returns in the 1.50%-1.80% range. Fitch anticipates it will be some time before U.S. life insurers' profitability returns to pre-crisis levels. </p> <p>Operating margins for U.S. life insurers remain under pressure due to declining investment yields, competitive pricing, and the soft economy, which is affecting revenue and sales growth. Management decisions to pull back from or exit certain markets and/or product lines are also having an impact. Life insurers have also beefed up their hedging programs, which adds to expenses. </p> <p>Results for U.S. life insurers have been affected positively by material declines in realized investment losses, which Fitch expects will continue through 2011. A number of life insurers were aggressive in writing down or selling problem assets, particularly non-agency residential mortgage backed securities (RMBS), lower quality commercial mortgage backed securities (CMBS), and corporate bonds in 2008 and 2009, and this positioned them for better results in 2010 and 2011. </p> <p>The full report, 'U.S. Life Insurers' 2011 GAAP Results in Line with Expectations' is available at '<a href="http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.fitchratings.com&esheet=6858683&lan=en-US&anchor=www.fitchratings.com&index=1&md5=18d52b54113e4eec9a2fe6e182d7af4a">www.fitchratings.com</a>' under the following headers: </p> <p>Sectors >> Financial Institutions >> Insurance >> Research </p> <p>Additional information is available at '<a href="http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.fitchratings.com&esheet=6858683&lan=en-US&anchor=www.fitchratings.com&index=2&md5=654081a3fe350e382add014f17852705">www.fitchratings.com</a>' </p> <p><org>Applicable Criteria and Related Research</org>: </p> <p>--'Life Insurance Rating Methodology', <chron>March 31, 2011</chron>; </p> <p>--'2011 Statutory Trends for the U.S. Life Sector', <chron>Aug. 17, 2011</chron>; </p> <p>--'2011 Outlook: <org>U.S. Life Insurance</org>', <chron>Jan. 11, 2011</chron>. </p> <p><org>Applicable Criteria and Related Research</org>: U.S. Life Insurers' 2011 GAAP Results in Line with Expectations </p> <p><a href="http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.fitchratings.com%2Fcreditdesk%2Freports%2Freport_frame.cfm%3Frpt_id%3D650710&esheet=6858683&lan=en-US&anchor=http%3A%2F%2Fwww.fitchratings.com%2Fcreditdesk%2Freports%2Freport_frame.cfm%3Frpt_id%3D650710&index=3&md5=bdf261d9297a2979fff4a0daec60a68d">http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=650710</a></p> <p>2011 Outlook: <org>U.S. Life Insurance</org></p> <p><a href="http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.fitchratings.com%2Fcreditdesk%2Freports%2Freport_frame.cfm%3Frpt_id%3D595365&esheet=6858683&lan=en-US&anchor=http%3A%2F%2Fwww.fitchratings.com%2Fcreditdesk%2Freports%2Freport_frame.cfm%3Frpt_id%3D595365&index=4&md5=3c8ba84fc6271271fd986da7f6b6f4a0">http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595365</a></p> <p>Life Insurance Rating Methodology </p> <p><a href="http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.fitchratings.com%2Fcreditdesk%2Freports%2Freport_frame.cfm%3Frpt_id%3D612905&esheet=6858683&lan=en-US&anchor=http%3A%2F%2Fwww.fitchratings.com%2Fcreditdesk%2Freports%2Freport_frame.cfm%3Frpt_id%3D612905&index=5&md5=b428e2c8e85277df06cdcd1995349c7b">http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=612905</a></p> <p>ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: <a href="http://cts.businesswire.com/ct/CT?id=smartlink&url=HTTP%3A%2F%2FFITCHRATINGS.COM%2FUNDERSTANDINGCREDITRATINGS&esheet=6858683&lan=en-US&anchor=HTTP%3A%2F%2FFITCHRATINGS.COM%2FUNDERSTANDINGCREDITRATINGS&index=6&md5=338b6e8eb82a00213f60de9eef394564">HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS</a>. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '<a href="http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2FWWW.FITCHRATINGS.COM&esheet=6858683&lan=en-US&anchor=WWW.FITCHRATINGS.COM&index=7&md5=93dbcbbe3313fe267c6e326bb29d77b7">WWW.FITCHRATINGS.COM</a>'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. </p> <p><img alt="" src="http://cts.businesswire.com/ct/CT?id=bwnews&sty=20110912006999r1&sid=acqr4&distro=nx" /><span class="bwct31415"></p> <p>Fitch Ratings<br /> Primary Analyst<br /> <person>Cynthia J. Crosson</person> , +1-212-908-0863<br /> Director<br /> <org value="ACORN:1942178792" idsrc="xmltag.org">Fitch, Inc.</org><br /> <location>One State Street Plaza</location><br /> <location value="LU/us.ny.nyc" idsrc="xmltag.org">New York, NY</location> 10004<br /> or<br /> Secondary Analyst<br /> <person>Douglas L. Meyer</person> , CFA, +1-312-368-2061<br /> Managing Director<br /> or<br /> Tertiary Analyst<br /> <person>Douglas R. Baker</person> , +1-312-368-3207<br /> Analyst<br /> or<br /> Media Relations, <location value="LU/us.ny.nyc" idsrc="xmltag.org">New York</location><br /> <person>Brian Bertsch</person> , +1-212-908-0549<br /> <a href="mailto:brian.bertsch@fitchratings.com">[email protected]</a></p> <p>Source: Fitch Ratings</p> </span>