Life/health financial strength rating downgrades outpace upgrades in 2003.In 2003, the life/health insurance industry experienced a gradual The Gradual (Latin: graduale, sometimes called the Grail) is a chant in the extraordinary form of the Roman Catholic Mass, sung after the reading or singing of the Epistle and before the Alleluia, or, during penitential seasons, before the Tract. downward migration in credit quality, with Best's Rating Best's rating A rating A.M. Best Co. assigns to insurance companies based on the company's ability to meet its obligations to its policyholders. downgrades outnumbering upgrades by more than a 2-to-1 margin, 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. a special report by the A.M. Best Co. "Life Health Downgrades Exceeded Upgrades in 2003" reports 49% of the 2003 downgrades within the life and annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. segment were attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a combination of poor earnings or weak capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. . The majority of the health insurance downgrades were due to large underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. losses and declines in capital base.
Reasons for Health Rating Actions--2003
No. of Rating Changes
Upgrades
Change in Ownership 4
Improved Earnings 2
Downgrades
Poor Earnings 4
Problem at Parent/Affiliate 1
Weak Capitalization 1
Note: Multicompany groups are treated as one unit.
Source: A.M. Best Co.
Note: Table made from bar graph.
Reasons for Life/Annuity Rating Actions--2003
No. of Rating Changes
Upgrades
Change in Ownership 5
Improved Earnings 1
Improved Earnings 4
Increased Parent Consideration 4
Downgrades
Change in Ownership 1
Increased Leverage; Acquisition 2
Investment Risk 3
Investment Losses; Capital Decline 3
Loss of Core Status 3
Poor Earnings 11
Problem at Parent/Affiliate 9
Weak Capitalization 12
Write-offs; Weak Capitalization 3
Note: Multicompany groups are treated as one unit.
Source: A.M. Best Co.
Note: Table made from bar graph.
Rating Changes, Life/Annuity and Health Rating Units--2002 to 2003
Number of
Rating
Changes
2003 2002
Total Upgrades 20 25
Total Downgrades 53 61
Life/Annuity Upgrades 14 19
Health Upgrades 6 6
Life/Annuity Downgrades 47 55
Health Downgrades 6 6
Note: Multicompany groups are treated as one unit.
Source: A.M. Best Co.
Note: Table made from bar graph.
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