Outlook for life insurance branded ‘weak’
THE outlook for the life insurance industry in Australia and New Zealand remains weak due to volatile investment markets and an uncertain industry environment, according toStandard & Poor’sRatings Services.
“We expect that the industry in 2003 will face the same difficulties as it did last year, with local and offshore pressures likely to have an impact,” Financial Services Ratings credit analyst Kate Thomson says.
According to Standard & Poor’s, Australian and New Zealand life insurers are contending with changing consumer product dynamics and rapidly changing equity market values.
The prediction for 2003, part of the ratings service’s Australian & New Zealand Life Insurance Digest, comes on the back of what it claims was a significant decline in life insurance global equity market values in 2002.
According to the digest, the downturn eroded capitalisation, reduced fee income as funds under management contracted, and lowered product revenue as consumers opted not to purchase additional investment products.
Thomson says, as a result, a large number of insurance companies’ ratings were lowered in 2002, includingAMP,Tower, andRoyal & SunAlliance.
She says several ratings will be watched closely as a result of ongoing difficulties set to be faced by the industry in 2003.
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The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
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