Fitch: Macroeconomic Headwinds Hamper U.S. Life Insurers

CHICAGO--()--Link to Fitch Ratings' Report: U.S. Life Insurance GAAP Results Dashboard (Midyear 2016)

https://www.fitchratings.com/site/re/886766

Declining interest rates, volatile equity markets and unfavorable macroeconomic headwinds hampered investment income and asset-based fee income for publicly traded U.S. life insurers, according to a new dashboard from Fitch Ratings summarizing GAAP results for U.S. life insurance companies. Pretax operating income declined by 19% in first-half 2016 for U.S. publicly traded life insurers in Fitch's rated universe.

"Unfavorable mortality and competitive pricing continue to hurt individual and group life insurance segments while volatile financial markets impacting the variable annuity, retirement plan and asset management segments," said Dafina Dunmore, Director, Fitch Ratings.

Industry results were also adversely affected by large reserve adjustments, particularly for MetLife, Inc. (Met) and Prudential Financial, Inc.(PRU). Average aggregate operating return on equity declined to 10.4% in first-half 2016 compared with 13.0% in the prior-year period for Fitch's rated universe.

Fitch believes the likelihood of interest rates remaining lower for longer was enhanced by the UK vote to withdraw from the European Union (EU), which led to a material decline in interest rates in 2Q16. Fitch expects low reinvestment rates to continue to be an earnings headwind going into the second half of 2016.

In this report, Fitch analyzes key drivers for first-half 2016 operating results for publicly traded life insurance organizations. The report compiles data from 15 publicly traded life insurers in Fitch's debt rating universe. The dashboard 'U.S. Life Insurance - GAAP Results' is available at 'www.fitchratings.com' or by clicking on the link.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria

Insurance Rating Methodology (pub. 17 May 2016)

https://www.fitchratings.com/site/re/881564

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Contacts

Fitch Ratings
Dafina M. Dunmore, CFA
Director
+1-312-368-3136
Fitch Ratings, Inc.
70 West Madison St.
or
Douglas Baker
Associate Director
+1-312-368-3207
or
Media Relations:
Hannah James, +1 646-582-4947
hannah.james@fitchratings.com

Contacts

Fitch Ratings
Dafina M. Dunmore, CFA
Director
+1-312-368-3136
Fitch Ratings, Inc.
70 West Madison St.
or
Douglas Baker
Associate Director
+1-312-368-3207
or
Media Relations:
Hannah James, +1 646-582-4947
hannah.james@fitchratings.com