Moody's Sees Increase In Group Life Profits

Reinsurers have pulled back from the group life market because of fear of the effects of a major terrorist attack. In the long run, that "is not a positive, in terms of exposure to risk," the Moody's analysts write.

Although higher employee turnover and weak investment returns also hurt in 2002, overall group life market conditions seemed to improve in 2003 and should improve further this year, the analysts predict.

The analysts also are predicting that this year will be a good year for sales of individual variable annuities and sales of funding agreement-backed note issuance programs, or "FANIPs," that are registered with the U.S. Securities and Exchange Commission. Insurers sell FANIPs as funding vehicles for pension plans.

Scarcity of capital appears to be hurting life reinsurers, while concerns about the effects of guarantees on in-force business are affecting the analysts' views of the individual life and individual health markets.

Group health insurers did well in 2002 and 2003, but their continued success will depend on their ability to increase rates and hold down claims costs, the analysts write.