U.S. life, health insurers' investment profits triple

Companies reporting the largest year-over-year increases in capital gains include Metropolitan Life Insurance Co., First Colony Insurance Co. and John Hancock Life Insurance Co.

As a result of substantial investment gains, insurers’ profits increased by 8.9 percent, or $2.3 billion, to $28 billion for the first nine months of 2005.

Companies that reported the largest year-over-year increases in earnings include Union Fidelity Insurance Co., Teachers Insurance & Annuity Association of America and Travelers Life & Annuity Co.

“Insurers have enjoyed an extended period of growth by nearly all measures, due in part to an industry trend toward asset accumulation and away from traditional products as baby boomers enter their prime earning years and put more money into variable annuities and similar insurance investment vehicles,” said Melissa Gannon, vice president of Weiss Ratings Inc., in a news release.

The value of insurers’ separate account assets increased 14.2 percent to $1.4 trillion in the third quarter of 2005, compared to $1.2 trillion for the same period in 2004. Separate accounts are established by insurers to fund variable annuities, variable life insurance or other contracts where investment returns are based on segregated assets.

The separate accounts increase represents continued consumer interest in investing in variable life and annuity products in anticipation of improved equity markets and rising interest rates.

Companies reporting the largest year-over-year increases in separate accounts include John Hancock Life Insurance Co. and Prudential Insurance Company of America, according to Weiss Ratings.

Weiss Ratings Inc.’s financial safety ratings illustrate the financial strength of life and health insurers, as upgrades outpaced downgrades by a factor of 6.6-1 in the company’s latest quarterly review.

Of the 838 insurers whose ratings were reviewed by Weiss using third-quarter 2005 data, 125 companies’ ratings were upgraded, and 19 were downgraded.

Notable upgrades include Merrill Lynch Life Insurance Co., from C+ to B-, and Jackson National Life Insurance Co., from C+ to B-.

Notable downgrades include Union Security Life Insurance Co., from B to C+.

Among the 905 life and health insurers ranked by Weiss, 42.7 percent, or 286, received favorable safety ratings of B- or higher.

That’s the highest percentage of highly rated companies since Weiss began rating insurers.

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.