TARP U.S. positive for life insurers financial

 

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May 1, 2009

EDITOR'S CHOICE; Pg 6

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Fitch Ratings, Fitch: U.S. TARP positive for life insurers financial



Fitch Ratings believes that the possible inclusion of life insurers in the United States Treasury Department's Troubled Asset Relief Program (TARP) could be a positive development for those who enjoy life and, therefore, could temper the future if the downward pressure is growing more capital than expected in the notes. Fitch believes that the government funding to provide a source of financial flexibility not currently available in the capital markets for life insurers.

A probable inclusion of life insurers in TARP has been reported by various media outlets during the last two days, but the knowledge of Fitch no life insurance has not yet been officially authorized to receive TARP funds. Fitch commentary today is intended to provide the market with a good understanding of how the provision of TARP could affect the fund life insurance advice, funding should be extended.

Although generally positive ratings for the receipt of TARP funds would not necessarily prevent future declines in ratings, especially moderate one notch to two slopes, as noted include factors beyond the capital, as income levels and volatility, risk management, and the strength of the franchise. In addition, the form and manner of support will also be an important factor of a notice of view, and this remains an unknown. Fitch will make judgments about the impact of government support on a case by case basis. Fitch expects that the impact of public support for the development aspects of its methodology.


As seen in the banking sector, government support through the injection of capital may help stabilize opinion. For life insurers, Fitch expects that this could lead to some stabilization of the insurer financial strength (IFS) rating or insurance for these entities are supported. However, similar to our treatment of banking companies that receive government support, Fitch anticipates there will be a greater possibility of a wider slit between the regulation of insurance companies and their holding company securities debt, particularly with regard to losses of hybrid capital instruments. Fitch believes that companies benefiting from government support will be at an increased risk of their right to elect to defer coupon payments of interest or losses on hybrids in order to preserve capital for the operating companies.

To date, only a handful of insurance agencies Fitch world known to have received capital injections from the government, the only US-based American International Group Inc (AIG). In the case of AIG, the support was necessary mainly because of problems related to credit default swaps, Non-insurance subsidiaries and the activities of lending in its insurance operations.

In September 2008, Fitch revised its outlook for the insurance industry-life of the United States to negative from stable, reflecting the significant deterioration in credit and equity markets, and the expected impact of investments realized and unrealized losses on life insurance capital levels and profitability. The negative outlook reflects concerns about the expansion of the industry market exposure due to growth of variable annuities, market performance guarantees which can add to the volatility of financial results and capital in a period unstable market conditions. Finally, Fitch is concerned that could develop liquidity pressures in some life insurers, if financial markets remain unstable and funding needs can be met.

Given that the prospects for change Fitch downgraded 25 of the 69 U.S. life and health insurance groups (including multi-lines and subsidiaries of foreign parents), which represents 36% of the universe and 70% of the public commented on the group to date. Reviews are underway. Most of the declines were limited to one or two notches.

Fitch's rating definitions and conditions of use of such ratings are available on the website of the public body, www.fitchratings.com. Published opinions, 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 of this site.


Keywords: public policy and government, the White House and the federal government, professional services, finance, Insu, Annuities, Capital Markets, stock market, finance, finance, investment, investment, Fitch Ratings.

This article was prepared by Insurance Weekly News editors from staff and other reports. Copyright 2009 Insurance Weekly News via VerticalNews.com.