Extra life insurers might quickly announce the sorts of huge, “non-cash” expenses that Lincoln Monetary and Prudential Monetary put of their earnings for the third quarter, an S&P International Rankings analyst stated in the present day.
Carmi Margalit, the life insurance coverage sector lead at S&P International, predicted that the costs will make earnings stories based mostly on publicly traded firms’ U.S. typically accepted accounting rules (GAAP) look ugly.
However the expenses ought to have little impact on the monetary stories the insurers file with state insurance coverage regulators, based mostly on regulators’ personal statutory accounting rules, and the costs are unlikely to have an effect on how S&P sees these insurers, Margalit stated.
“Total,” he stated, “we don’t assume it’s a ranking driver.”
What It Means
Fourth-quarter earnings stories that spook buyers early subsequent yr may not have a lot bearing on whether or not life insurers could make good on life and annuity advantages guarantees to your shoppers.
The Fees
Life insurers use large portfolios of bonds and different investments to assist long-term life insurance coverage, annuity, incapacity insurance coverage and long-term care insurance coverage obligations.
GAAP guidelines as soon as let life insurers clean over adjustments within the worth of belongings and obligations, however now, GAAP requires insurers to place the results of adjustments in asset worth assumptions of their earnings.
