WEISS RATINGS

Life and Health Insurance Core Profits Decline 6%
Large Capital Gains Boost Overall Results 4.9%

PALM BEACH GARDENS, Fla., Sept. 8, 1997 — Life and health insurers suffered a 6% decline in net profits from their core operations in the first quarter of 1997, compared to the previous year, according to Weiss Ratings, Inc., a leading provider of ratings and analysis on the insurance industry.

However, the industry was able to more than make up for the decline by cashing in some of the hefty profits in its investment portfolios. The industry realized $702 million in capital gains during the quarter, more than double the gains realized during last year's first quarter.

All told, including both the net income from operations and capital gains, net income was up 4.9% compared to last year's first quarter.

"The industry's first quarter capital gains represent a reversal from the three previous years, when the industry suffered consecutive capital losses," commented Martin Weiss, chairman of Weiss Ratings. "But when insurers start trading in and out of markets, it's not exactly an indication of long-term stability. A healthier trend would be better profit increases in their core operations."

Noteworthy Upgrades And Downgrades

Among the 1,253 company ratings reviewed by Weiss, 27 were upgraded, while 64 were downgraded, reflecting declining income from operations and other factors. The most notable upgrades include:

• Lincoln Liberty Life Insurance Co. (NE) upgraded from D+ to C-
• London Pacific Life & Annuity Co. (NC) upgraded from D+ to C-
• Reliastar Life Insurance Co. (MN) upgraded from C+ to B-

Significant downgrades include:

• American Chambers Life Insurance Co. (OH) downgraded from D- to E+
• Georgia International Life Insurance Co. (TX) downgraded from C- to D+
• Union Bankers Insurance Co. (TX) downgraded from C- to D+

Capital And Surplus Continue To Grow

Compared to the same quarter last year, the companies enjoyed 9.9% growth in capital and surplus -- from just under $156 billion at March 31, 1996, to $172.1 billion at March 31, 1997. With assets growing at a somewhat slower pace of 7.9% during the same period, the industry's overall capital strength continued to improve.

However, a growing amount of this capital -- $9.5 billion now vs. $8.8 billion a year ago -- comes from "surplus notes," which are a form of debt that is counted as pure capital.

Asset Quality

Repossessed real estate declined nearly 20% from first-quarter 1996 levels and now represents only 4.3% of capital and surplus. "This continues a five-year improving trend that began in 1993 when repossessed real estate represented an alarmingly high 10.3% of capital," Weiss stated.

Weiss ratings are based on an analysis of a company's capital, five-year history of profitability, quality of investments, and stability. The latter category combines a series of factors including asset growth, premium growth, strength of affiliate companies and liquidity.

Weiss issues safety ratings on over 16,000 financial institutions, including HMOs, life and health insurers, Blue Cross/Blue Shield plans, property and casualty insurers, banks and brokers. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers and businesses.

Consumers who need more information on the financial safety of a specific company may purchase a rating or analysis directly from Weiss for as little as $15 by calling 1-800-289-9222. Weiss Safety Ratings are also available at many local libraries or through insurance agents.

Note: Net profits from core operations is the net gain from operations before dividends to policyholders and federal income taxes.


15430 Endeavour Drive, Jupiter, FL 33478 · (561) 627-3300 · www.weissratings.com