The sector’s financial impairments reached the lowest point in 50 years; a mere two known impairments, which represent 0.14 percent of the industry, came in slightly higher than the one company, representing 0.07 percent of the industry at the time, which became impaired in 1962.
According to the report, the two impaired insurers—one an accident and health insurer and the other a burial insurer—represent typical profiles for recently impaired companies in the life/health space. Both were also felled by the most common cause of impairment: inadequate pricing and/or deficient loss reserves.
In the face of a competitive market, weak macroeconomic factors and a low-interest rate environment, A.M. Best reports satisfaction with the industry’s capital growth as well as improved balance sheets and direct premium incomes.
In 2010 and 2011, the life/health industry’s results benefited from a decline in realized losses, an increase in unrealized capital gains and improving stock prices. The individual and group annuity segments, followed closely by the individual and group A&H segments, generated the majority of the industry’s overall earnings last year.
The industry’s ordinary life segment contributed solid earnings, but to a lesser degree than in previous years, as the industry was impacted by statutory accounting expense strains.
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