The U.S. life/health (L/H) insurance industry saw a higher number of Credit Rating (rating) upgrades in the first half of 2022 compared with the same prior-year period, with improved capitalization levels a driving force, according to a new AM Best report.

Rating downgrades decreased in the first half of 2022, according to the Best's Special Report, "U.S. Life/Health Ratings Activity in 2021 Mixed as Insurers Navigate Headwinds," mainly due to the removal of ratings lift owing to a decline in the strategic importance to the parent due to mergers and acquisitions (M&A). Other main takeaways in the report include:

• In the life/annuity (L/A) segment, 10 ratings were upgraded and three were downgraded in first-half 2022, compared with seven upgrades and seven downgrades in the first half of 2021. For the health segment, AM Best upgraded six ratings and four were downgraded. By comparison, four were upgraded and none were downgraded in the first half of 2021.
• The percentage of L/H ratings placed under review declined in first-half 2022, to 6.7% from 9.4%. Ratings on six L/A carriers and four health carriers were placed under review during first-half 2022, due mostly to M&A.
• AM Best assigned three ratings in the first half of 2022, similar to the first half of 2021. More than three-quarters of all L/H rating actions were affirmations.

AM Best's outlook for the U.S. L/A and health market segments is stable. According to the report, and given the pressures of the low interest environment over the last decade, higher interest rates will be welcomed by the L/A insurers—provided the increase is gradual. The majority of the U.S. health insurers have strong levels of risk-adjusted capitalization and good liquidity sufficient to withstand COVID-19 uncertainties ahead.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=323402.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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