L/H impairment rate remains low in 2005.The seven U.S. life/health company financial impairments recorded by A.M. Best in 2005 continue a trend of low impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. since 2000, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the A.M. Best Special Report "2005 Life/Health Impairments Bounce 1. bounce - (Perhaps by analogy to a bouncing check) An electronic mail message that is undeliverable and returns an error notification (a "bounce message") to the sender is said to "bounce". 2. bounce - To play volleyball. The now-demolished D. C. Off 2003-2004 Historical Lows." The low impairment rates of the past three years reflect the stable financial markets and economy; the industry's efforts to diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. its asset portfolio; and consolidation that has eliminated some of the more thinly capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. insurers. Causes--L/H industry Impairments (1976-2005) Affiliate Problems 19.6% Inadequate Pricing 24.0% Rapid Growth 16.4% Alleged Fraud 8.2% Investment Problems (Overstated Assets) 14.9% Miscellaneous 9.6% Significant Change in Business 5.0% Reinsurance Failure 2.3% Significant Change in Business 5.0% Note: Table made from pie chart. Source: A.M. Best Co. Annual Number of L/H Impairments [GRAPHIC OMITTED] Source: A.M. Best Co. Causes--Life Company Impairments (1976-2005) Affiliate Problems 26.1% Inadequate Pricing 16.5% Rapid Growth 5.2% Alleged Fraud 15.7% Investment Problems (Overstated Assets) 20.9% Miscellaneous 10.4% Significant Change in Business 1.7% Reinsurance Failure 3.5% Note: Table made from pie chart. Source: A.M. Best Co. |
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