The credit outlook for the U.S. life insurance industry is stable for
2013, reflecting the industry's strong balance sheet fundamentals and
improved liquidity profile, according to Fitch Ratings.
These positive factors have somewhat mitigated Fitch's ongoing concerns
over the challenging macroeconomic environment that continues to
pressure operating fundamentals. While Fitch believes the industry is
well positioned to withstand macroeconomic challenges over 2013, the
outlook is vulnerable to severe, albeit unexpected shocks to the economy.
The 'fiscal cliff' and Eurozone debt crisis remain the predominant risk
for the global economic and credit outlook, although Fitch's base case
assumption is that policy makers will take necessary steps to avoid
Fitch expects that sustained low interest rates will limit earnings
growth, but will not have a material negative effect on industry capital
in 2013. The industry's exposure to an unexpected interest rate spike
would raise concerns over disintermediation risk.
Fitch expects that if interest rates stay low much beyond 2014, the
agency's outlook would likely be revised to negative based on weakened
earnings profile and anticipated negative capital impacts.
The improvement in asset quality since 2008/2009 has leveled off and is
in line with the industry's long-term averages. Fitch's base case
assumption is that the reduced level of investment losses reported by
U.S. life insurers in 2012 will continue into 2013.
Fitch also expects ongoing ratinalization of products and markets
resulting from the financial crisis to accelerate in 2013. Credit
implications are likely negative over the near term due to potential
capital charges, but could be favorable longer term. This
rationalization process is creating increased opportunities for both
traditional players and nontraditional players, which are expected to
play an increasing role in the industry.
Fitch will host a teleconference on Monday, Dec. 17 at 11 a.m. ET to
discuss its outlook for the North American insurance industry, the
details of which are below:
-- Dial-In: +1-877-819-0869 (North America) or +1-706-902-0405
-- Conference ID: #79856297
There will be a Q&A session following the analysts' prepared remarks.
The full '2013 Outlook: U.S. Life Insurance' is available at 'www.fitchratings.com.'
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: 2013 Outlook: U.S. Life
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DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'.
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
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