Rating outlooks this year for a group of global multiline insurers examined by Standard & Poor's are mostly stable despite tough competition and other challenges they face, the rating service said.
The firm's analysis came in a report published today entitled "Industry Report Card: Global Multiline Insurers Set To Ride Out Volatile Industry Conditions And Regulatory Changes In 2008."
Karin Clemens, S&P credit analyst, said, "Management teams face the challenge of juggling top-line growth and profitability considerations at a time when competition is intense, the financial markets are particularly volatile, and the macroeconomic outlook is deteriorating."
"At the same time," she said, "GMIs have to keep abreast of key changes in regulation and financial reporting around the world as globalization causes accounting and regulatory requirements to converge."
The rating outlooks for nine out of the 11 groups covered in the report are stable, reflecting what S&P said is view that "GMIs are generally well positioned to cope with more difficult operating and financial market conditions, while maintaining strong financial performance and sound capitalization."
For the majority of global multiline carriers, S&P said it expects rating outlooks to remain stable throughout 2008.
But, the firm mentioned that, "the headroom at existing rating levels is likely to diminish, as earnings are in danger of losing momentum because of economic slowdowns, weaker financial markets, and soft pricing, particularly in property and casualty insurance."
Earnings resilience, sound capitalization, and risk-management capabilities will therefore continue to be the main factors determining the ratings on all GMIs for the remainder of 2008, according to S&P's analysis.
The firm said it continues to consider the GMIs' exposure to U.S. subprime-related risks to be manageable, reflecting the companies' diversified operating profile and strong or very strong capitalization and earnings capacity, combined with sound liquidity positions.
"We don't believe that the financial strength of the majority of these groups is under imminent pressure," said Ms. Clemens.
She cautioned, however, that the firm could "consider negative rating actions should substantial asset impairments, credit losses, or significant claims from directors' and officers' policies and errors and omissions coverage disproportionately dampen 2008 earnings or capitalization."
S&P also said it expects a more subdued financial and macroeconomic environment to directly affect GMIs' performance in 2008, potentially placing wider-ranging downward pressure on ratings, the report said.
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