When Weiss Ratings recently calculated profits at the country’s largest life and annuity insurers had dropped a whopping 84 percent in 2011, it definitely caught our eye.
To grasp the reasons behind this drop and what it means for the industry as a whole LifeHealthPro.com spoke with Gavin Magor, left, senior financial analyst at Jupiter, Fla.-based Weiss Ratings, an independent agency that rates U.S. insurance companies and financial institutions.
LHP: What’s behind the decline in profits?
Gavin Magor: Apart from the obvious movement toward reserves being increased, what we think is probably driving it, and it’s hard to be specific, is a movement away from affordable rates, meaning the affordability for the insurers to maintain the guaranteed rates to the annuity holders, given the lower yields that are achievable on investments at present.
