AM Best’s outlook for the U.S. life/annuity market segment has been revised to negative from stable, “due to the significant volatility and uncertainty in the financial markets created by the COVID-19 virus.”
AM Best says that in its view, the L/A industry maintains strong capital and liquidity resources. However, the following key factors have led to the negative outlook: the acceleration of the global economic slowdown, “increasing the expectation of dampened earnings throughout 2020 for spread and fee-driven businesses;” and the quick further deterioration in the U.S. economy, “paired with its direct impact on equities and interest rates, with a greater expectation of a longer path to sufficient improvements from record low levels for the 10-year Treasury yield, as well as a flattened yield curve.”
In the report, entitled Market Segment Outlook: U.S. Life/Annuity, the agency stated that as interest rates and the equity markets plummet, it expects operating performance “to move to the negative, driven by declining sales and intensifying spread compression.”
