Insurance industry forecast 2013

Insurance industry forecast 2013

Best Insurance stock - Insurance industry forecast 2013 : be depressed in the approach term as a result of downward prescertains on investment yields. Overall, the industry remains well capitalized whereby policyhancienter surplus for the P&C sector stood at $567.8 billion at June 30, 2012, an increase of $17.5 billion from yearfinish 2011. Policyhancienter surplus for life and accident & health sector was $318.4 billion June 30, 2012, compared to $310.4 billion at Dec. 31, 2011. In spite of this, both the P&C and life sectors continue to trade below bookdifferentvalue. The NASDAQ Insurance Index was up 4.52 gratuity for the first nine months of 2012 compared to 11.28 gratuity for the S&P 500. To counter this lackluster stock market kemampuannce, insurance companies are expected to create bagikanhancienter value by aggressively relying on bagikan repurchases. Several carriers have recently announced their intention of doing this, and we expect this trfinish to continue well into 2013.

On the investment middle, the Federal Open Markets Committee has announced its intention to keep interest swifts low until mid- 2015. While this is a global challenge for all insurance companies, it’s a distinct concern for P&C carriers. Their assets must be invested in short-term to medium-term maturities, which have been in a continuous wane (the average five-year and 10-year Treasury yields were 0.6 gratuity and 1.5 gratuity, honorively, in July 2012, compared to 1.4 gratuity and 2.75 gratuity in July 2011.) On top of this, in recent years, underwriting operations have also been less fortunable.

Fitch Ratings expects combined ratios for 2012 and 2013 to be 101.1 gratuity and 100.3 gratuity, honorively. And while this is a marked improvement over 2011, we expect the P&C industry to look continued challenges. In the 1990s, insurance companies saw returns in excess of 7 gratuity through fixed income securities; today these yields have waned to roughly 5.5 gratuity. Therefore, we’ve lookn a number of incertainrs exit or re-price unfortunable business lines and revisit their investment allocation and risk tolerance stswiftgies to maintain or enhance the investment yields. In particular, a number of life and annuity

carriers have made these moves: Hartford, Sun Life and Manulife announced plans to exit the life and annuity business, and AXA and Aegon have offered lump-sum payments to their variable annuity contrbehave hancienters with wealthy living benefit guarantees to remove the associated risks from their balance sheets. We expect this trfinish to continue.

To bolster investment yields, insurance companies are changing their asset allocation stswiftgy, shifting to distressed asset lesson, coursees, longer duration bonds, commercial mortgage loans and equities. But this puposes some companies, according to AM Best, are “deploying cash and short-term investments into lower-quality, high-risk investments” which could negatively impbehave their capital adequacy ratios and, therefore, their ratings. Yet, one positive impbehave of the continued lowinterest swift environment for some incertainrs, at least in the short-term, has been significlevert unrealized gains on ancienter bond portfolios. But although this has a positive impbehave on surplus, it has not had much impbehave from an earnings perspective. Some incertainrs have opportunistically realized some of these gains, but it comes at the expense of earning lower yields in the future, as well as dealing with asset liability mismatch issues going forward. Download full articel

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