Thursday’s New York Times article “Insurance Industry Joins Banking Giants on the Hot Seat” pretty much says it all. “Insurance stocks have plunged more than 30% in the last 5 days with Prudential Financial the big loser on Thursday.”
It’s no longer just the banks. Life Insurance Company asset quality and capital ratios are under the microscope and Prudential Financial, Hartford Financial and MetLife Inc. were the focus on Thursday.
On Friday, Bloomberg reported that MetLife Inc., the biggest U.S. life insurer, said:
“a major” credit-rating firm will conduct a review in the fourth quarter that may have “a material adverse effect” on results and the company’s financial condition.
“The difficulties experienced recently by many financial institutions, including our competitors in the insurance industry,” may prompt ratings companies to “heighten the level of scrutiny” for their reviews, New York-based MetLife said today in a regulatory filing.
Also on Friday, Standard and Poor’s stated:
“We expect to revise the ratings or outlooks on several life insurers in the next few months because of the impact of these challenging macroeconomic conditions.” They went on to say “The ratings agency believes that although short-term pressures are significant, the industry’s long-term fundamental strengths remain intact. Therefore, S&P expects most downgrades to be one to two notches at the most.”
The current financial downdraft is impacting every industrial, service and marketplace sector – but don’t lose your well reasoned perspective. So far as your life insurance program is concerned, please consider the recommendation in our prior post of October 3, 2008:
“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.”
