Outlook for Life Insurers Better Than Property Insurers
As 2010 draws near it seems that anyone placing bets on the insurance industry would be better off putting money on the life insurers rather than the property casualty industry.
Yesterday MetLife, the nation's largest life insurer - although it does sell property casualty on the side - issued a bullish prediction about the coming year, saying it expected 50 percent growth in operating earnings in 2010.
Life looks rosy for MetLife, which experienced one of its rare slumps during the recession - and for much of the rest of that industry as well. A report by Conning Research & Consulting says that while life insurers remain short of capital, they have stayed profitable during the 2008-2009 financial crunch, and "life insurance products ... have been remarkably stable."
The life insurance industry may have solved one of its capital problems with help from insurance regulators. A ruling made this week by the National Association of Insurance Commissioners will add about $11 billion to life insurers' capital by the end of the year by allowing them to count more deferred tax assets as capital.
It's a victory that the life insurance industry has been fighting for all year. "Life insurers must demonstrate strong financials in order to have access to capital and credit from financial markets," Whit Cornman of the American Council of Life Insurers told BNET Finance.
By contrast, the property casualty industry has been bombarded with negative news about those insurers. A report by MarketScout, a Dallas-based electronic insurance exchange, shows that rates in this market dropped an average 5 percent in November alone, compared with a year earlier, and there are signs that this may continue as the "megabrokers" such as Aon, Marsh & McLennan and Willis Group buy up smaller brokers and continue their cutthroat pricing.
Aon recently touted the fact that prices were either stabilized or declining for property casualty insurance, "with ample capacity and the broadest terms and conditions seen in years." Easy for Aon to say. It's not the one getting less money. Big business insurers, such as Chubb and Travelers, are likely to be the ones that get hurt.