Insurance companies see profits skyrocket in first quarter

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The nation's life and health insurers recorded a $4.5 billion profit for the first three months of 2002, representing a $1.1 billion, or 32.8 percent, increase over the same period last year, according to research by Weiss Ratings Inc., an independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.|ret||ret||tab|

An increase in net written premiums of $6.1 billion, or 5.2 percent, drove the profit growth. Net written premiums increased from $117.7 billion in first quarter 2001 to $123.8 billion in first-quarter 2002. Also contributing to the industry's first quarter profitability were declines in policy surrenders, life claims and annuity claims.|ret||ret||tab|

Life and health insurers reporting the largest increases in net income were Metropolitan Life Insurance ($176.6 million), American General Life Insurance (174.3 million) and Sun Life Assurance ($174.2).|ret||ret||tab|

"Insurers' revenues were buoyed by an increase in life insurance sales in the months following the Sept. 11 terrorist attacks," said Melissa Gannon, vice president of Weiss Ratings. "Consumers were unexpectedly reminded of the need to protect their loved ones in case of an untimely demise. At the same time, many investors were exiting the stock market and purchasing insurance investment products in an effort to gain more financial security."|ret||ret||tab|

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Industry capital shrinks|ret||ret||tab|

Despite the growth in earnings, insurers suffered a 0.4 percent shrinkage in capital falling from $233.1 billion at March 31, 2001, to $232.3 billion at March 31, 2002. The decline in capital was primarily caused by a $2.2 billion increase in the asset valuation reserve liability an increase required by state regulators to protect against future investment losses.|ret||ret||tab|

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Junk bond holdings up 8 percent|ret||ret||tab|

Investments in junk bonds totaled $117.1 billion at the end of first quarter 2002, up 8 percent compared to last year, as companies sought higher yields to support payouts on investment products. |ret||ret||tab|

Companies reporting the largest increase in junk bond holdings were AIG Annuity Insurance ($975.4 million), Teachers Insurance and Annuities Association ($842.4 million) and SunAmerica Life Insurance ($654.2 million.)|ret||ret||tab|

"This continued upward trend in junk bond holdings is disturbing, given the high default rates this year. We hope to see the trend stop short of the dangerous levels reached in the early l990s," Gannon said.|ret||ret||tab|

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Notable upgrades, downgrades|ret||ret||tab|

Among the 983 insurers recently reviewed by Weiss, 32 companies were upgraded and 14 were downgraded. Notable upgrades include:|ret||ret||tab|

American Family Life Assurance Co. (Columbus, Neb.) from C to B-minus;|ret||ret||tab|

MetLife Investors Insurance Co. (Missouri) from C to B;|ret||ret||tab|

Northern Life Insurance Co. (Washington) from C-plus to B-minus.|ret||ret||tab|

Notable downgrades include:|ret||ret||tab|

Associates Financial Life Insurance Co. (Tennessee) from B-plus to B;|ret||ret||tab|

Great Southern Life Insurance Co. (Texas) from C to D-plus;|ret||ret||tab|

Protective Life Insurance Co. (Tennessee) from B-minus to C-plus.|ret||ret||tab|

The Weiss Safety Ratings are based on an analysis of a company's risk-adjusted capital, five-year historical profitability, quality of investments, liquidity and stability. The latter category combines a series of factors including asset growth, premium growth, strength of affiliate companies and risk diversification.|ret||ret||tab|

Weiss issues safety ratings on more than 15,000 financial institutions, including insurance companies, banks, and brokerage firms. Weiss also rates the risk-adjusted performance of more than 11,000 mutual funds and more than 7,000 stocks. Weiss Ratings receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses and libraries.|ret||ret||tab|

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