A.M. Best Special Report: Credit Rating Downgrades in U.S. Life/Health Industry Outpace Upgrades for Second-Straight Year

OLDWICK, N.J.--()--The proportion of Long-Term Issuer Credit Rating (Long-Term ICR) downgrades for the U.S. life/health industry was up again in 2016, to 6.0% from 5.0% in the previous year, and for a second-straight year, outpaced upgrades, according to an A.M. Best special report.

The Best’s Special Report, titled, “Rating Downgrades Continued to Outpace Upgrades for Life/Annuity and Health Carriers in 2016,” states that for life/annuity carriers, the challenging persistent low interest rate environment continued to pressure earnings. The Patient Protection and Affordable Care Act also continued to have a negative impact on health insurers’ earnings and risk-adjusted capital positions. As a result, the sector experienced more downgrades and fewer upgrades for a second straight year. In 2016, A.M. Best took action on the Long-Term ICRs of 386 rating units, which describes either an individual insurer or a consolidation of companies and is the financial basis on which A.M. Best performs its rating evaluations. The overwhelming majority (81.9%) of those rating actions were affirmations.

The following are some other highlights from the report.

  • In 2016, 22 rating units were assigned the “under review” modifier, significantly down from 43 in 2015. The majority of the rating units assigned the “under review” modifier were in the health segment, mainly reflecting merger and acquisition announcements among the large publicly traded health carriers that occurred in mid-2015;
  • There were 12 Long-Term ICR downgrades and four upgrades in the life/annuity segment, compared with 10 downgrades and nine upgrades in 2015. The health segment experienced 11 Long-Term ICR downgrades and 12 rating upgrades in 2016, compared with 11 downgrades and 10 upgrades in 2015; and
  • In 2016, 85.4% of the life/annuity segment’s outlooks were stable, while 75.5% of the health segment’s outlooks were stable. The percentage of stable outlooks in the overall life/health industry remained virtually flat in 2016, at 81.5%.

To access a copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=258431.

A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED.

Contacts

A.M. Best
Brian Virostek
Financial Analyst
+1 908 439 2200, ext. 5531

brian.virostek@ambest.com
or
Michael Adams
Senior Financial Analyst
+1 908 439 2200, ext. 5133

michael.adams@ambest.com
or
Joseph Zazzera
Director
+1 908 439 2200, ext. 5797

joseph.zazzera@ambest.com
or
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com
or
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644

james.peavy@ambest.com

Contacts

A.M. Best
Brian Virostek
Financial Analyst
+1 908 439 2200, ext. 5531

brian.virostek@ambest.com
or
Michael Adams
Senior Financial Analyst
+1 908 439 2200, ext. 5133

michael.adams@ambest.com
or
Joseph Zazzera
Director
+1 908 439 2200, ext. 5797

joseph.zazzera@ambest.com
or
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com
or
Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644

james.peavy@ambest.com