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TEXT-S&P on North American life insurers
May 30, 2012 / 2:02 PM / in 5 years

TEXT-S&P on North American life insurers

May 30 - The North American life insurance industry is facing a number of
challenges despite strong earnings and balance sheets. In a new report, "North
American Life Insurers' Balance Sheets Are Strong, But Better Earnings Might Be
Hard To Come By," published May 30, 2012, on RatingsDirect, Standard & Poor's
Rating Services says that its credit outlook for the North American life
insurance industry remains stable. This is supported in large part by strong
capital and liquidity, as well as sound investment portfolios that have incurred
only moderate losses.	
	
"We expect life insurers' net investment income to remain constricted by low 	
interest rates," said Standard & Poor's credit analyst Matthew Carroll. "We 	
anticipate that this, along with intense competition (particularly in 	
more-commoditized products distributed through third parties), will likely 	
continue to limit operating margins and lower the potential for our taking any 	
positive ratings actions."	
	
On the whole, we expect few rating changes in 2012--unless we lower our 	
sovereign rating on the United States of America, which would likely lead to 	
downgrades of the eight life insurance groups we currently rate 'AA+'.	
	
"Under our baseline economic assumptions, we expect the North American life 	
insurance industry to maintain strong balance sheets with relatively stable 	
earnings," Mr. Carroll continued. "Life insurers' earnings are largely a 	
function of the performance of policies in force, with new business 	
contributing modestly to current-year earnings. We view the life insurance 	
sector as a mature industry that should grow in tandem with GDP, though we 	
believe sales of retirement savings products will likely develop at a faster 	
pace, reflecting an aging population seeking solutions for retirement income."	
	
The report is available to subscribers of RatingsDirect on the Global Credit 	
Portal at www.globalcreditportal.com. If you are not a RatingsDirect 	
subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 	
or sending an e-mail to research_request@standardandpoors.com. Ratings 	
information can also be found on Standard & Poor's public Web site by using 	
the Ratings search box located in the left column at www.standardandpoors.com.

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