WEISS RATINGS

Life and Health Insurers' Profits Grow for Third Consecutive Year
Junk Bond Holdings Also Increase

PALM BEACH GARDENS, Fla., June 15, 1998 -- U.S. life and health insurers earned $25.3 billion last year, up 22.6% from 1996 and representing a third straight year of growth, according to an analysis by Weiss Ratings, Inc., the only independent provider of insurance company ratings and analysis.

However, the growth in junk bond holdings picked up pace in 1997, with a 25% increase. For the first time this decade, holdings of these investments grew as a percentage of capital -- from 37.6% in 1996 to 41.5% in 1997.

"An increase in unsafe investments is notable by itself, but when these investments increase in proportion to the capital needed to cushion potential losses, we start to become concerned," said Martin Weiss, chairman of Weiss Ratings, Inc.

Noteworthy Upgrades and Downgrades

Among the 1,294 company ratings reviewed by Weiss, 50 companies were upgraded and 64 were downgraded.

Notable upgrades include:
Company Previous
Rating
New
Rating
American National Ins Co (Galveston, Texas) B+ A-
Investors Life Ins Co North America (Philadelphia, PA) D+ C-
MBL Life Asr Corp (Newark, NJ) D+ C

Notable downgrades include:
Company Previous
Rating
New
Rating
American Family Life Asr Co of Columbus (Columbus, Ga.) B C
Life Reassurance Corp of America (Stamford, Conn.) B C+
SAFECO Life Ins Co (Redmond, Wash.) A- B+

Group health insurance profits continue to decline

Earnings growth came from nearly all lines of business. However, the group health insurance sector that saw profits decline 64% in 1996 experienced another 20% earnings drop in 1997 to $419 million. This sector now represents only 2% of overall earnings, as compared to 14% of earnings just five years ago. Sales of individual and group annuities have picked up the slack, each now representing 25% and 16% of earnings, respectively.

Strong stock market returns also contributed to the industry's earnings. During 1997, realized capital gains increased 37.5% -- from $1.6 billion to $2.1 billion.

Capital and surplus grows at consistent pace

The industry's capital and surplus continued to grow during 1997, increasing by a healthy 13.3%, in line with growth patterns since 1995. Surplus notes, a form of debt that regulators count as capital, now represent only 5.9% of capital versus 6.2% in 1996, reversing the upward trend that began with 4.4% in 1994.

Troubled Real Estate Continues to Decline

Nonperforming mortgages and repossessed real estate continued to decline during 1997 -- by 42% and 33% respectively, as compared to 1996 levels. As a result, these two problem areas combined now represent only 5% of total capital.

Weiss' ratings are based on an analysis of a company's 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.

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.


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