Credit Rating (rating) downgrades in the U.S. life/annuity and health insurance segments in first-half 2024 more than doubled compared with the same prior-year period, primarily due to deterioration in risk-adjusted capitalization and balance sheet metrics, according to a new AM Best special report.

The Best’s Special Report, titled, “L/H Rating Downgrades Outnumber Upgrades in First-Half 2024,” notes that Issuer Credit Rating downgrades in the first half of 2024 rose to 11 from five in the first half of 2023. The life/annuity segment saw eight of the downgrades, with the remainder on health insurers; most of these ratings had been previously placed under review. The second most-common driver of downgrades was downward revisions in companies’ enterprise risk management assessments. Upgrades remained flat year over year at five for the first-half periods.

“US L/A insurers have benefited from robust annuity sales, strong liquidity and risk-adjusted capital and improved new money yields, but also must also contend with market-sensitive lapse rates and asset credit risk, as well as a slowdown in life insurance sales momentum,” said Helen Andersen, industry analyst, AM Best. “Health insurers generally saw continued favorable earnings, though some smaller, less diversified carriers have struggled in markets where there was competitive or regulatory pressure on operations.”

Other highlights from the report include:

• Affirmations led rating actions across the life/health segments at 74%, compared with 82% in first-half 2023.
• The number of ratings placed under review increased to 15 in the first six months of 2024 compared with 10 at year-end 2023. Additionally, life/health rating units with a stable outlook decreased over the six-month period, while the proportion of positive and negative outlooks increased during first-half 2024.
• AM Best assigned three initial ratings in the first half of 2024 to three individual life writers. Total rating actions fell slightly due to a decline in rating units.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=347806.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2024 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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