OLDWICK, N.J.--(BUSINESS WIRE)--Credit rating activity for the U.S. life/health (L/H) insurance industry was positive for a second-straight year in 2018, with upgrades outpacing downgrades and a decrease in the number of insurers placed under review, according to a new AM Best report.
The Best’s Special Report, titled, “U.S. Life/Health Ratings Upgrades Outpace Downgrades in 2018,” states that improved risk-adjusted capitalization and increased profitability, owing to U.S. tax reform, along with a modest increase in interest rates, expense reductions and product modifications, primarily drove the positive Long-Term Issuer Credit Rating (Long-Term ICR) development in 2018. However, modest premium growth and increasing investment risk continue to challenge life/annuity (L/A) carriers. Rating development for U.S. health insurers was generally positive as well, as growth in capital and surplus was driven by positive earnings supported by strong operating results in all major lines of business.
AM Best reported 39 upgrades and 18 downgrades for L/H carriers in 2018, compared with 31 upgrades and 15 downgrades in 2017. Overall, AM Best took action on the Long-Term ICRs of 396 rating units, which describes either an individual insurer or a consolidation of companies and is the financial basis on which AM Best performs its rating evaluations. The vast majority of rating actions in 2018 were affirmations (77%).
The following are some other highlights from the report:
- Rating upgrades were evenly divided between the L/A and health segments in 2018 at 19 each, while the L/A segment saw 10 downgrades, compared with six in the health segment. In 2017, the L/A segment had more than twice as many upgrades as the health segment, while downgrades were evenly divided between the two;
- In 2018, 26 rating units were assigned the under review modifier, a decrease from 32 in 2017. The decline largely was due to the transitioning of some of the rating units placed under review following release of the updated Best’s Credit Rating Methodology in 2017; and
- In 2018, 87.8% of the L/H segment’s outlooks were stable, compared with 84.7% in the previous year.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=283336.
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