JULY 18 - 24, 2016
U.S. APPLICATIONS FOR INDIVIDUALLY UNDERWRITTEN LIFE INSURANCE UP YEAR OVER YEAR, BUT SLOWING MONTH TO MONTH
U.S. applications for individually underwritten life insurance rose 1.1% in June compared to June 2015, but slid 1.0% compared to May 2016 applications, according to the MIB Life Index. Year-to-date, applications in the first half grew 3.4% compared to first half 2015, according to the Index.
A 2.3% climb in applications among individuals aged 60 and older led the June over June increase, followed by a 1.6% rise in applications among individuals aged 0-44, while applications among individuals aged 45-59 slipped 0.6%.
The growth in first-half applications was driven by a 4.6% jump in applications among individuals aged 0-44, who accounted for 54% of all applications written. A 2.7% climb in applications among individuals aged 60 and over, ranked second; followed by a 1.7% increase in applications among individuals aged 45-59, who accounted for 29% of applications written in the first half, Braintree, MA-based MIB Group found.
NET INCOME AT U.S. PROPERTY-CASUALTY INSURERS DROPS 26.5%
Net income reported by U.S. property and casualty insurers fell 26.5% in the first quarter to a composite $13.3 billion, down from $18.1 billion in first quarter 2015, according to the Insurance Information Institute (III).
A 44.1% spike in catastrophe losses to $4.9 billion, up from $3.4 billion in first quarter 2015 and 4.7% growth in net losses for non-catastrophe claims to $82.2 billion from $78.5 billion contributed to the earnings decline, driving losses and loss adjustment expenses up 6.3% to $87.1 billion from $81.9 billion. As a result, net underwriting gains were sliced almost in half to $2.2 billion, down from $4.1 billion in first quarter 2015, and the combined ratio rose to 97.5%, up from 95.7%.
Net investment gains derived from net investment income and realized capital gains and losses dropped 19.0% to $13.2 billion, down from $16.3 billion in first quarter 2015, as together interest payments from bonds and dividends from stocks declined 6.8% to $10.9 billion, down from $11.7 billion, as bond yields contracted.
Still, net written premium volume rose 3.2% to $130.1 billion, up from $126.1 billion in first quarter 2015, helped by growth in new vehicle sales and construction.
Additionally, policyholder surplus ticked up 0.7% to $676.3 billion from $671.9 billion, and the ratio of net premiums written to that surplus – the measure of capital adequacy – stood at 0.77%.
Commenting on the condition of the U.S. property casualty industry at the end of the first quarter, the III's Dr. Robert Hartwig and Dr. Steven Weisbart said, "The bottom line is that the industry is extremely well-capitalized and financially prepared, if necessary, to pay very large scale losses in 2016 and beyond."
DOJ FILES BRIEF TO DISMISS NAFA'S SUIT AGAINST DOL
The U.S. Department of Justice (DOJ) has filed a motion asking Judge Randolph Moss of the U.S. District Court for the U.S. District of Columbia to dismiss the lawsuit filed by the National Association for Fixed Annuities (NAFA) against the Department of Labor's (DOL's) implementation of its Fiduciary Rule.
NAFA alleged the DOL exceeded its authority in writing the rule to regulate individual retirement plans and arbitrarily and improperly included fixed income annuities under the Best Interest Contract Exemption.
In its brief, the DOJ said the DOL acted within its rulemaking authority and said, "NAFA asks for relief that would prolong and sustain the harm to retirement investors," Best News Service reports.
OCC OUTLINES RISKS FACING U.S. BANKS
The U.S. Office of the Comptroller of the Currency (OCC) has issued its Semiannual Risk Prospective outlining the major risks to safety and soundness currently facing national banks and savings associations (banks).
The OCC found that increasing cyber threats, reliance on third-party service providers and resiliency planning pose the greatest operational risks for banks.
On the regulatory side, banks face risks meeting the integrated mortgage disclosure requirements and the amended Military Lending Act (which become effective on October 3, 2016) as well as managing risks posed by the Bank Secrecy Act.
Because banks face challenges growing revenue in the current low-interest rate environment, strategic risks remain high as banks struggle to execute their strategic plans.
In line with this, strong loan growth combined with easing underwriting standards pose credit risks, as do concentrations and risk layering in indirect auto, commercial and industrial and commercial real estate lending.
Low energy prices, the potential for rising interest rates and banks' increased partnering with marketplace lending firms pose further risks and "may develop into broader system-wide issues," according to the OCC.
To read the OCC's 34-page Semiannual Risk Perspective for Spring 2016, which details the different risks faced by community banks, mid-sized banks and large banks, click here.
Michael White Associates (MWA) is pleased to provide this
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