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NEW YORKMoody's Investors Service Inc. says the stable outlook for its A1 average financial strength rating for the U.S. life insurance industry is supported by such factors as a favorable operating environment, improving national economy, modest credit losses and a gradual rise in interest rates.
In its midyear overview of U.S. life insurers, New York-based Moody's said the average ratings of stockholder-owned and mutual life insurance companies have remained fairly stable or shown modest improvement.
In the current favorable environment, 75% of the life insurers rated by Moody's have a stable outlook, the rating agency said. Still, Moody's noted that there are slightly more companies with negative outlooks or reviews for possible downgrades than there are companies with positive outlooks or reviews for possible rating upgrades.
But the negative pressures at some companies are generally due to company-specific factors, Moody's said, rather than industrywide factors that may affect life insurers' ratings.
Moody's said almost all of the life insurers that it rates enjoy an investment grade financial strength rating, with most placing relatively high in that category with a rating of A or better.
Having a high financial strength rating is a key competitive factor for life insurers in the marketplace, Moody's said. As industry consolidation continues, many lower rated companies--that consequently aren't as well-positioned to compete--likely will be acquired by higher rated companies, according to Moody's.
Mutual companies enjoy particular strength, with the average mutual insurer rated nearly Aa2 by Moody's; the average stockholder-owned life company is rated near A1, two notches lower.
Moody's said it believes that the ratings differential between mutual and stock companies likely will persist for the foreseeable future.