Insurance companies' profits up $7.2 billion

With the economy recovering and the stock market up, profits of the nation's life and health insurers jumped $7.2 billion, or 214 percent, to $10.6 billion in the first six months of 2003, according to a news release from Weiss Ratings Inc.

Driving the industry's steep profit increase was a $9 billion reduction in money flowing out of variable annuity accounts, which fell to $14.2 billion for the first half of 2003, compared to $23.2 billion for the same period in 2002.

"The economic rebound has been a boon to insurers' investment portfolios," said Melissa Gannon, vice president of Weiss Ratings Inc., in the news release. "The assets backing variable annuity products have been faring better so insurers haven't had to transfer capital into separate accounts."

The recent rise in the equity market produced a $6.6 billion unrealized gain for the industry, contributing to an increase in capital surplus of 12.7 percent, from $225.8 billion as of June 30, 2002, to $245.5 billion at June 20, 2003.

Life and health insurers reporting the largest increases in capital and surplus were Metropolitan Life Insurance Co., American General Life Insurance Co., Sunamerica Life Insurance Co., Massachusetts Mutual Life Insurance Co. and New York Life Insurance Co.

"The increase in capital and surplus reflects the upturn in the equity market," said Gannon. "With the improvement in asset values, insurers have not had to dip into capital to maintain reserves as they previously were.

Weiss Ratings Inc. is an independent provider of ratings and analyses of financial services companies, mutual funds and stocks.