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TMCNet:  Fitch: Tepid Market for U.S. Funding Agreement-Backed Notes

[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)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723058

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 opportunistic basis.

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'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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