OREANDA-NEWS. April 04, 2016. In a report published today, Fitch Ratings notes that U.S. property/casualty (P/C) insurer financial leverage edged up during 2015 and operating fixed-charge coverage was down from a 2014 cyclical peak.

Financial leverage increased slightly in 2015 as growth in borrowings, primarily to fund increased merger and acquisition activity, more than outpaced internal capital growth. The financial leverage ratio for Fitch's rated universe was 22.4% at year-end 2015 versus 21.6% for the prior year, which remains consistent with an 'A' debt rating median.

The group's operating performance faltered with a decrease in underwriting profits of almost \\$4 billion and a decline in investment income of over \\$3 billion. GAAP fixed-charge coverage, excluding investment gains and losses, deteriorated to 7.9x in 2015 versus 9.1x in 2014, from what was likely a cyclical peak given shifting insurance market conditions. Coverage ratios remain consistent with a 'BBB' debt rating median.

Operating EBIT and fixed-charge coverage ratios are expected to deteriorate in 2016, as core underwriting performance is likely to decline. Diminished loss reserve releases, a return to normalized catastrophe activity and lower investment yields add further pressure to 2016 earnings. The potential for lower interest costs on debt financing is limited and an overall deleveraging is not expected.

The full report 'U.S. P/C Insurers' Leverage and Debt-Servicing Capacity' is available at 'www.fitchratings.com' under 'Insurance' and 'Special Reports' or by clicking on the link.