The ill effects of the financial crisis will hamper the life-annuity industry for the remainder of the year, a new report by Hartford, Conn.-based Conning Research and Consulting finds. The study, “Life-Annuity Forecast & Analysis by Line of Business” says the impact of the crisis was evident in decreases in assets and surplus, among life insurers.
“Preliminary results for 2008 indicate that the life insurance industry had a statutory net loss of $51 billion, and that ending surplus plus AVR (asset valuation reserve) dropped 13% to $273 billion,” notes Terence Martin, an analyst at Conning. “Our latest forecast for the life-annuity industry projects net operating gain to recover, but realized and unrealized capital losses will continue to challenge the industry at least through 2009.”
However, Conning did detect some positive signs, predicting the industry will show a net statutory operating gain in 2009, albeit one far below the robust levels of 2003 through 2007.
“Despite possible negative short-term impacts from some of the issues looming over the industry, such as the need to rebuild capital and changing regulations, our longer term view of the life insurance industry is favorable,” adds Stephan Christiansen, director of research at Conning. “We project that surplus plus AVR will increase 23% to $337 billion by 2011 as the industry adapts to the new environment and due in part to additional capital paid in to the industry. Additionally, we forecast premium growth through 2011 based in part on demand stimulated by estate planning, a focus on savings and more conservative protection needs, and by a need for more stable investment alternatives.”
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