STATISTICALLYSPEAKING
How often do you monitor your capital position?
Insurers’ Capital
Management
Practices Shifting
Annually 3%
A NEW REPORT FINDS INSURERS
paying more frequent attention to capital
requirements and altering capital raising
methods. Life insurers are adjusting the
way they calculate capital requirements a
new study from New York-based Towers
Watson ;nds. The report, “Evolving Capital
Management Practices,” queried 30 CFOs
and found they expect to make greater use
of economic capital when determining
capital requirements.
“Capital management is becoming a top
priority for many companies,” Jack Gibson,
leader of Towers Watson’s life insurance
consulting practice in the Americas, said in
a statement. “That more than three-quarters
of CFOs (77%) said that capital manage-
ment practices—primarily determination
of capital requirements, monitoring of cap-
ital position and management of capital lev-
els—are receiving greater attention at their
companies than they were in January 2008,
speaks volumes to where they are fo-
cused.”
The survey says the shift is largely re-
lated to the ;nancial crisis.
“The global ;nancial crisis and recession
have put pressure on life insurers’ capital
positions,” says Todd Erkis, Towers Watson
director. “The amount of capital required
has increased, while life insurers’ available
capital has decreased. At the same time, the
options available to raise capital have be-
come more limited and more costly.”
However, CFOs were generally optimis-
tic about the economy moving forward,
with most respondents indicating they
think that GAAP net revenue and GAAP net
income will increase at least 4%, compared
to the same quarter last year. They were also
bullish on premium growth, with 54% of
respondents predicting growth in new life
and annuity premiums over the same quar-
ter last year; 25% expecting premiums
to stay the same, and 21% predicting a
decrease. INN
More than monthly 10%
Annually 0%
Monthly 20%
More than monthly 17%
Monthly 30%
Two Years ago
Currently
What actions have you taken to raise capital?
Reinsurance
Past two years 50%
Next 12 months 47%
Curtail new business growth
Past two years 23%
Next 12 months 7%
Reprice/redesign products
Past two years 43%
Next 12 months 43%
State-permitted practices
Past two years 23%
Next 12 months 10%
Issue debt
Past two years 37%
Next 12 months 20%
How does your Q1 net income
compare to same quarter last year?
Contribution from parent company
Past two years 37%
Next 12 months 10%
New securitization
Past two years 30%
Next 12 months 40%
Raise equity
Past two years 27%
Next 12 months 13%
Stay about
the same
27%
Cut shareholder dividends
Past two years 27%
Next 12 months 3%
Increase more than 10% 23%
Decrease - 0%
Source: Towers Watson
