Industry will continue to face capital constraints in the short term

The life insurance industry is working through capital losses and constraints resulting from the 2008 financial crisis with some success, reported by Conning Research and Consulting.

Terence Martin, analyst of Conning Research and Consulting, said: We project net after-tax statutory income of $16b for 2009–less than half the pre-crisis figure of 2007–despite capital losses of $20b in the year. Even with a $16b capital infusion in 2009, the industry is still well below pre-crisis 2007 levels, and capital leverage ratios have risen dramatically. The industry will continue to face capital constraints in the short term, even as capital losses abate.

Stephan Christiansen, director of research at Conning, said: Underpinning our 2009 forecast is a substantial partial release of the large reserves the industry set up in 2008 for individual annuity minimum guarantees.

Annuities have been the volatile segment for the industry, generating a $4b loss for the combined 2008-2009 period, compared to a $12b gain in 2007 alone. Life insurance products, on the other hand, have been remarkably stable during the crisis, and this year will generate over $8b of net operating gain-in line with prior years.

Conning Research and Consulting provides insurance industry analysis to insurers and industry stakeholders. Its published research includes market coverage of 30 segments of the industry in addition to industry forecasting and identification and analysis of major strategic issues. It provides analyses on industry products and issues.