U.S. Life/Health Industry Sees Limited Ratings Volatility in 1H 2016
OREANDA-NEWS. The U.S. life/health industry’s rating activity over the first half of 2016 remained balanced between downgrades and upgrades, but the assignment of the “under review” modifier doubled compared with the first half of 2015, according to a new A.M. Best special report.
The Best’s Special Report, titled, “Limited Ratings Volatility for First Two Quarters of 2016,” states that the majority of 30 rating units assigned the “under review” modifier were in the U.S. health segment, mainly reflecting merger and acquisition announcements among the large publicly traded health insurers.
A.M. Best reported seven downgrades and seven upgrades among life/health and life reinsurance carriers through June 30, 2016. Upgrades and downgrades were almost evenly divided between the U.S. life/annuity and health segments. This compares with 11 downgrades and 10 upgrades reported through the same period in 2015. The vast majority of rating actions over the past six months were affirmations, consistent with trends in the past few years. The report also summarizes rating activity among the top 10 largest rating units/companies and key drivers leading to their rating movements.
The health segment saw four rating downgrades and four upgrades, as the influence of the Affordable Care Act on operating metrics within the sector continued to limit upgrades. In the life/annuity segment, there were three rating downgrades and three upgrades, with numerous factors including the low interest rate environment, equity market volatility and an uptick in mortality as key drivers behind some of the rating movement.
From a rating outlook perspective, the proportion of life/health carriers with stable rating outlooks decreased to 82.0% through the first half of 2016 from 87.4% at the same time last year, while the percentage of “under review” ratings increased to 7.7% from 3.7%. The proportions of positive and negative outlooks slightly increased in the same period year over year.
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