CHICAGO--(BUSINESS WIRE)--The North American life insurance industry continues to maintain balance sheet strength and reasonable debt-servicing capacity, according to a Fitch Ratings special report. In aggregate, the financial leverage ratio (FLR) for Fitch Ratings' U.S. publicly traded life insurance universe was largely unchanged in 2015 at 26.4% compared with 27.0% at year-end 2014. On an individual company basis, 45% of the insurers Fitch examined experienced a decline in their FLR, with an average decline of 3.3%.
The financial leverage ratio of all three Canadian insurers in Fitch's universe declined in 2015, with the aggregate FLR ratio falling 1.6% to 16.9% at year end. In general Canadian life insurance companies use larger amounts of preferred debt in their capital structure than their peers in the U.S. leading to lower FLR's due to the assignment of 100% equity credit to these securities, per Fitch's criteria.
Interest coverage improved modestly on an aggregate basis, driven by the absence of large reserve charges associated with long term care that affected results in 2014. On a normalized basis, however, interest coverage ratios declined modestly for many life insurers due to earnings headwinds associated with low interest rates, adverse mortality and U.S. dollar strengthening.
Additional information is available on www.fitchratings.com.
North American Life Insurers -- Financial Leverage and Debt-Servicing Capacity