[December 12, 2012]

Fitch: Stable Outlook for U.S. Life Insurers in 2013

The credit outlook for the U.S. life insurance industry is stable for 2013, reflecting the industry's strong balance sheet fundamentals and improved liquidity profile, according to Fitch Ratings.

These positive factors have somewhat mitigated Fitch's ongoing concerns over the challenging macroeconomic environment that continues to pressure operating fundamentals. While Fitch believes the industry is well positioned to withstand macroeconomic challenges over 2013, the outlook is vulnerable to severe, albeit unexpected shocks to the economy.

The 'fiscal cliff' and Eurozone debt crisis remain the predominant risk for the global economic and credit outlook, although Fitch's base case assumption is that policy makers will take necessary steps to avoid disorderly shocks.

Fitch expects that sustained low interest rates will limit earnings growth, but will not have a material negative effect on industry capital in 2013. The industry's exposure to an unexpected interest rate spike would raise concerns over disintermediation risk.

Fitch expects that if interest rates stay low much beyond 2014, the agency's outlook would likely be revised to negative based on weakened earnings profile and anticipated negative capital impacts.

The improvement in asset quality since 2008/2009 has leveled off and is in line with the industry's long-term averages. Fitch's base case assumption is that the reduced level of investment losses reported by U.S. life insurers in 2012 will continue into 2013.

Fitch also expects ongoing ratinalization of products and markets resulting from the financial crisis to accelerate in 2013. Credit implications are likely negative over the near term due to potential capital charges, but could be favorable longer term. This rationalization process is creating increased opportunities for both traditional players and nontraditional players, which are expected to play an increasing role in the industry.

Fitch will host a teleconference on Monday, Dec. 17 at 11 a.m. ET to discuss its outlook for the North American insurance industry, the details of which are below:

-- Dial-In: +1-877-819-0869 (North America) or +1-706-902-0405 (International)

-- Conference ID: #79856297

There will be a Q&A session following the analysts' prepared remarks.

The full '2013 Outlook: U.S. Life Insurance' is available at 'www.fitchratings.com.'

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: 2013 Outlook: U.S. Life Insurance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm rpt_id=696496

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