NEW YORK --U.S. insurers, in an industry awash in excess capital, face a stretch of turbulence that won't soon abate, according to a panel of speakers at a Standard & Poor's Ratings Services conference on June 2.
Standard & Poor's has kept its stable outlooks on the life, managed care, property/
casualty, and reinsurance sectors--reflecting our opinion that upgrades and downgrades will be almost equal in the next six months.
casualty, and reinsurance sectors--reflecting our opinion that upgrades and downgrades will be almost equal in the next six months.However, the tables could be turning, especially if we see weakening economic trends and industry-specific factors that depress earnings. In any event, the potential speed and depth of an industry slump should come as no surprise, panelists said. 
"We're sitting in an environment where we have way too much capital," said V.J. Dowling, (top right photo) managing partner at Dowling & Partners Securities LLC.
Predicting that the industry might see as many as three bad calendar years, Dowling added that because of the excess cash floating around, "we're going to see more and more price competition."
Speaking dur
ing the panel session titled "The Insurance Industry: Varying Perspectives from the Street," Robert Glanville, (top left photo) managing director at Pine Brook Road Partners LLC, suggested that the industry slowdown could be slightly shorter than Dowling predicts. Nonetheless, companies face a rocky road ahead and will have to be more careful.
ing the panel session titled "The Insurance Industry: Varying Perspectives from the Street," Robert Glanville, (top left photo) managing director at Pine Brook Road Partners LLC, suggested that the industry slowdown could be slightly shorter than Dowling predicts. Nonetheless, companies face a rocky road ahead and will have to be more careful. "What we're looking for now is management teams to be a lot more disciplined to reduce their exposures," Mr. Glanville said. 
Edward Spehar, managing director at Merrill Lynch & Co., said enterprise risk management has become increasingly important, and that companies "have certainly made great strides in hedging." At the same time, he said it might be "naive to assume companies are doing as well as they say they are doing hedging exposures."
Standard & Poor's believes the insurance sector is well-positioned to navigate through the accounting volatility inherent in investment portfolios, given the generally manageable levels of exposure to the more volatile asset classes, healthy liquidity,
and strong capitalization levels. And with limited prospects for organic growth, we expect to see prudent debt-financed share-repurchasing programs as an integral part of capital management, as raising new capital has been difficult until recently.
(For a complete copy of S&P's news release, please contact
Jeff Sexton, New York, (1) 212-4383448jeff_sexton@standardandpoors.com
Analyst Contacts:
Grace Osborne, New York (1) 212-438-7227
Mark Puccia, New York (1) 212-438-7233
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