In the short to intermediate term, the current worldwide economic upheaval will leave few financial sector companies unscathed. The life insurance industry is all about quality of assets, capital levels and financial ratings. In today’s illiquid economic environment and focus on asset quality and capital ratios, many life insurance company’s financial ratings are bound to change.
Reuters today reported – “Moody’s Investors Service warned on Friday it may downgrade credit ratings on some U.S. life insurers as a financial crisis takes a toll on their investment returns.”
American General Life Insurance Company, operating as a subsidiary of AIG Insurance, had its ratings lowered after a U.S. Government takeover. AIG now plans to sell the company to raise capital.
This evening, Fitch Ratings place Genworth Financial and its Life Insurance Companies ( Genworth Life & Annuity, Genworth Life Insurance Company of New York, etc.) on a “Ratings Watch Negative – The rating action reflects Fitch’s concerns over declining life insurance capital levels and the potential for additional investment impairments in the second half of 2008.” Ratings may be revised (downward) in the next several weeks. Over the short to intermediate term, we’ll probably see the ratings of any number of other well known Life Insurers trend downward to reflect capital markets stress.
What do these potential ratings changes mean if you’re shopping for insurance or currently insured by a company whose ratings are lowered? The short answer is it depends on how far the ratings fall. While A++ (AM Best), Aaa (Moody’s) and AAA (S&P and Fitch) are the top ratings at present, companies rated as low as A- (AM Best), AA- (S&P and Fitch) and Aa3 (Moody’s) are still considered “Excellent, Very Strong and Secure Very High” by the major rating services.
There’s a new reality when considering life insurance company financial ratings. If the company you’re considering (for a new insurance purchase) is rated A- or AA- or Aa3, or your existing company falls from A+ to A-, AAA to AA- or Aaa to Aa3, you still have ( in the rating service’s opinion) a top quality, safe and secure life insurance company.
There’s a new reality when considering life insurance company financial ratings. If the company you’re considering (for a new insurance purchase) is rated A- or AA-, or your existing company falls from A+ to A-, or AAA to AA- you still have ( in the rating service’s opinion) a top quality, safe and secure life insurance company.
