|[December 10, 2013]
Fitch: Tepid Market for U.S. Funding Agreement-Backed Notes
NEW YORK --(Business Wire)--
Link to Fitch Ratings' Report: U.S. Funding Agreement-Backed Note Market
Update (Tepid Market Since 2009)
Fitch Ratings estimates that 2013 will represent the fifth-straight year
of issuance levels below $16 billion for funding agreement-backed notes
(FABN) by U.S. life insurers. This follows a pre-crisis, three-year
period from 2006 - 2008 with more than $29 billion a year issued.
Reduced issuance reflects the pullback by a number of insurers concerned
about interest rate risk, as well as several insurers that have simply
exited the market.
Because the profitability of the product is dependent on the capital
market environment, Fitch believes that life insurance companies are
taking a measured approach and are only participating on an
FABN issuance in recent years has been mainly a three to four issuer
market led by MetLife, Inc. and New York Life Insurane Co. and, to a
lesser degree, Mass Mutual Financial Group and Principal Financial Group.
Fitch believes that capacity exists for additional issuance for the
industry based on its strong capital position as well as
company-specific limitations. For many life insurers, operating leverage
has declined in recent years and is at moderate levels. Statutory
capital has strengthened when measured by regulatory risk-based capital
for the industry and the key FABN issuers.
The full report, 'U.S. Funding Agreement Back Note Market Update' is
available at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
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