LONDON Jan 28 European and U.S. life insurers
will seek takeovers in booming Asia and put more money into
riskier assets this year to bolster flagging profits, Moody's
said on Monday.
The outlook for developed world life insurers is negative,
Moody's said in its annual overview of the sector, with
investment income under pressure from rock-bottom rates, and
sales wilting as stagnant economies force consumers to retrench.
Life insurers will likely respond by buying up rivals in
faster-growing emerging markets, and by increasing their
investment in riskier assets that yield higher returns, Moody's
Recent emerging market acquisitions by European insurers
include Prudential's takeover of Thailand's Thanachart Life in
November last year, and Zurich Insurance Group's
purchase of Santander's Latin American insurance unit
Insurers seeking to boost their investment returns could put
more money into equities, infrastructure or direct commercial
Sovereign and corporate bonds, traditionally seen as low
risk, accounted for 62 percent of European life insurers'
investment portfolios at the end of 2011, according to Moody's.
Central banks in the United States and Europe slashed
interest rates close to zero to prop up the economy in the wake
of the 2008 banking crisis, dragging down bond yields, and
eating into insurers' investment income.
Life insurers in Germany and France, whose best-selling
products are savings policies that offer customers guaranteed
minimum returns, have been hardest hit. Many are cutting their
guarantees and trying to sell more alternative products where
investment risk is borne by the customer.
U.S. and European life insurers face a further threat this
year from potential sovereign debt crises, amid lingering
worries over the creditworthiness of peripheral euro zone
countries, Moody's said.
Last year, Moody's downgraded the credit rating of Spanish
and Italian insurers, and also changed the outlook for
pan-European players Allianz, Axa and Aviva to negative,
reflecting their heavy exposure to bonds issued by
critically-indebted euro zone nations.