During the past financial crisis, insurers were affected just as intensely as securities traders or investment banks. A significant number of insurance houses had to decrease their dividends a year ago. In 2010, it appears that the trend reversed, although only within the United States market until now.
Despite 2009, over 60% of US insurance companies in fact boosted their return on investment for the opening half of 2010 as the financial markets stabilized. More companies are likely to raise their ROI with the final statements of 2010, according to Bloomberg analyses. Additional stir up is caused by the ongoing merger bids. Bloomberg also indicates that players in the insurance business keep track of the performance and activities of their competitors so that they can stay on par with them and safeguard their position in the market, and that is why they frequently make homogeneous moves.
Is this going to reflect on insurers in Canada as well? When it comes to Canadian banks, they are likely outperforming the rest of the globe currently â€“ companies operating in the insurance industry are suffering diminished demand for new plans. During the 2010 Insurance Market Briefing in Toronto, Ontario, professionals from the sphere concluded that year 2010 has been an optimistic year for the industry, particularly weighed against the preceding period of disorder. It may not have brought growth, but it still helped the sector achieve a certain level of steadiness in the business environment allowed the insurers to relax after a couple of seasons of great efforts.
However, the legal environment is only now yet to change. In the light of the impending law modifications from the Office of the Superintendent of Financial Institutions (OSFI), the International Accounting Standards Board (IASB) and other authorities, we do not think that insurers will deliberately lower their liquidity by paying out unnecessary dividends to their shareholders sooner than the final scope of all the regulatory implications has been clarified. For those reasons, it is safe to bet that Canadian insurance company shareholders will not see a notable improvement for a little while still.
We have been bringing articles on the Canadian insurance market in a few earlier articles, such as Betterments in Transamerica Life Canadaâ€™s Credit Ratings or Basel in Canada?.
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