Fitch: Stable Financial Leverage and Coverage for Life Insurers in 2015

CHICAGO--()--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

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882348

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. 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.

Contacts

Fitch Ratings
Douglas Baker
Associate Director
+1 312-368-3207
Fitch Ratings, Inc.
70 W. Madison Street
Chicago IL, 60602
or
Douglas Meyer
Managing Director
+1-312-368-2061
or
Media Relations:
Hannah James, New York, + 1 646-582-4947
Email: hannah.james@fitchratings.com

Contacts

Fitch Ratings
Douglas Baker
Associate Director
+1 312-368-3207
Fitch Ratings, Inc.
70 W. Madison Street
Chicago IL, 60602
or
Douglas Meyer
Managing Director
+1-312-368-2061
or
Media Relations:
Hannah James, New York, + 1 646-582-4947
Email: hannah.james@fitchratings.com