The U.S. life/health industry saw more credit rating upgrades than downgrades in first-half 2020, driven primarily by improved levels of risk-adjusted capitalization. However, according to a new AM Best special report, negative rating actions could increase in the second half of the year as the COVID-19 pandemic negatively impacts companies’ sales, operations, operating performance and investments.
The Best’s Special Report, titled, “Life/Health Upgrades Outnumber Downgrades in First-Half 2020,” states that AM Best upgraded the Long-Term Issuer Credit Ratings of 12 rating units and downgraded four among life/annuity (L/A) and health carriers in the first half of 2020, compared with 15 upgrades and four downgrades in the first half of 2019. Upgrades were more concentrated in the L/A segment, which reported eight upgrades. Nearly 80% of rating actions in first-half of 2020 were affirmations, consistent with most years.
Positive rating developments for L/A/ carriers was mostly due to increased strategic
What Happened: It could be a case of election year jitters, frustrations over the vaccine timeline or both, but plenty of health care ETFs, particularly those emphasizing biotechnology and pharmaceuticals equities, are retreating.
Wall Street isn’t taking the declines sitting down. In fact, a spate of recent downgrades by sell-side analysts are adding fuel to the fire.
“The area where analysts do seem to be worried–somewhat surprisingly given the race for a COVID vaccine–is on shares of Health Care stocks, particularly in the Biotech industry, according to the ETF Research Center (ETFRC).
Why It’s Important: ETFRC notes that of the 10 ETFs most afflicted by declines in sell-side ratings, six are health care funds, one of which is the Invesco