The big news on the ratings front this month was Hartford's decision to exit the life and annuity business, placing its annuity operations into runoff and seeking a sale or other strategic alternative for its life business. S&P downgraded their claims paying rating from A to A- while Moody's upgraded the outlook on its senior debt from negative to stable.
Another highlight came when MetLife was one of four large financial institutions to fail a "stress test" imposed on large banking institutions. The failure has been criticized for applying tests applicable to banks to an insurance organization and there is some thought the decision may be reversed later in the year.
One last headline was Prudential joined the list of companies that have ended sales of long-term care insurance, indicating they will honor existing contracts.
We have mentioned the industry concern about reserve adequacy for certain universal life contracts with secondary guarantees. The NAIC has signed off on a bifurcated approach to allow existing policies to be reserved differently from new policies on an as needed basis.
From a practical perspective these kinds of changes and strategic moves may significantly impact existing policyholders but there is no certain way to know how significant the impact may be until the company begins to take actions - and even then the changes can occur over long periods of time and are impossible to predict.
We recently helped a client review an existing policy with Sun Life of Canada that has exited the US market, considering alternatives should Sun Life more aggressively lower interest rates or raise mortality charges on their US block of business. Let us know if we can assist you with such issues for you or your clients.