Asia

Insurers poised to withstand profit drop

Asia’s insurance industry will face significantly reduced profits over the next year, according to Standard & Poor’s. The rating agency said the industry’s operating performance in 2008 is “likely to deteriorate” and some firms could report losses, mainly reflecting falling investment returns but also slower new business sales and a general fall in confidence among policyholders. However, it added that Asia’s insurers have generally built up their balance sheets over the past five years and are in a good position to “ride out the storm” without major changes to their ratings. S&P recently revised the outlooks on Singapore and Taiwan’s life insurance sectors to negative from stable. “The capitalisation of most rated insurers has been hit by declining profits or a reduction in investment evaluation reserves. However, we believe these setbacks are still manageable and will not affect most ratings due to adequate capital levels for the current ratings. But if market conditions deteriorate, insurers that have thin capital buffers will prove vulnerable,” said S&P analyst Connie Wong.