While insurers are taking advantage of the current interest rate environment to replace higher-coupon debt at lower interest costs, a new report from Fitch indicates that this is not substantially boosting financial leverage. In aggregate, financial leverage for Fitch's P&C (re)insurer universe declined modestly to 22.7 percent in 2012 from 22.9 percent in the prior year.

Yet in the report published today, which analyzes key financial factors of P&C insurers, Fitch affirms that U.S. P&C insurers continue to maintain balance sheet strength and adequate debt-servicing capacity, noting that earnings growth led to improved shareholders' equity, which more than offset the higher borrowings seen in the sector.

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