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Fitch Releases Report on North American Life Insurers' Financial Leverage & Debt-Servicing Capacity
April 9, 2013 / 2:18 PM / 5 years ago

Fitch Releases Report on North American Life Insurers' Financial Leverage & Debt-Servicing Capacity

(The following statement was released by the rating agency) CHICAGO, April 09 (Fitch) Fitch Ratings today released a special report that details its examination of U.S. and Canadian life insurance companies' financial leverage, debt-servicing capacity and maturity distribution of outstanding debt. In this report, Fitch analyzes key holding company credit metrics of publicly traded life insurance organizations, examining changes in financial leverage and debt-servicing capacity over the past four years. The report compiles regulatory filing data from publicly traded life insurers in Fitch's debt rating universe. The North American life insurance industry continues to maintain balance sheet strength and reasonable debt-servicing capacity. U.S. life insurers' GAAP earnings before interest and taxes (EBIT) excluding realized investment gains and losses declined by 7% in 2012, and correspondingly coverage metrics declined as well. However, interest and fixed charge coverage on a pre-tax operating income basis improved slightly in 2012. Fitch believes the industry will be challenged to make further material improvements in coverage metrics in the near to intermediate term due to macroeconomic headwinds, primarily a sustained low interest rate environment. In aggregate, financial leverage for Fitch's publicly traded life insurance universe has steadily increased since 2009 and was at a four-year high as of year-end 2012. This has been driven by increased debt issuance, a decline in shareholders' equity (excluding unrealized investment gains and losses) due in part to a deferred acquisition cost (DAC) GAAP accounting change and a change in Fitch's hybrid equity-credit criteria. Fitch believes the industry faces minimal near-term refinancing risk since only a modest portion of outstanding borrowings mature in 2013 and 2014. Issuance of long-dated and perpetual securities in 2012, primarily to pre-fund upcoming maturities or to fund acquisitions, has been robust at over USD10 billion in the U.S. and CAD2.7 billion in Canada. The report 'Life Insurers' Financial Leverage and Debt Servicing Capacity' is available at 'www.fitchratings.com' under 'Insurance' and 'Special Reports'. Contact: Tana M. Higman Director +1-312-368-3122 Fitch Ratings, Inc. 70 West Madison St. Chicago, IL 60602 Douglas L. Meyer, CFA Managing Director +1-312-368-2061 Douglas R. Baker Analyst +1-312-368-3207 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research Life Insurers’ Financial Leverage and Debt-Servicing Capacity here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE 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 THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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