WEISS RATINGS

Financial Failure Strikes 40 Insurance Companies,
8 HMOs, and 4 Banks in 2001

PALM BEACH GARDENS, Fla., January 14, 2002 - Despite the recession, only 40 insurance companies failed in 2001, a modest 5 percent increase over the 38 failures recorded in 2000, according to Weiss Ratings, Inc., the only independent provider of ratings and analyses on the insurance industry. Property and casualty insurers represented a disproportionate 34 of the 40 insurance company failures, with the Reliance Group's insolvency alone accounting for 12 of the P&C company failures.

Conversely, the number of HMO failures declined for the second straight year, dropping 58 percent to 8 in 2001, from 19 in 2000. Likewise, bank failures decreased by 43 percent from 7 to 4 in the same period.

"The property and casualty insurers are the weakest right now. We saw P&C failures start to climb in 2000, and that trend has not changed," commented Martin D. Weiss, Ph.D., chairman of Weiss Ratings. "Fortunately, the HMO industry appears to be stabilizing as companies return to profitability. And, despite an overall weakening in the banking industry, banks and thrifts are still generally well-capitalized thanks to the last 10 years of strong earnings."

Among the 48 HMOs and insurance companies that failed in 2001, Weiss had issued financial safety ratings on 36, with 92 percent of those rated "Weak" or lower. The remaining 8 percent had been rated "Fair." The largest failed companies were:

Company Date of
Failure
At Date of Failure
Total Assets
($ Mil)
Weiss
Safety Rating
Reliance Insurance Co. (Penn.) 1/29/01 6,069 E
PHICO Insurance Co. (Penn.) 8/16/01 727 D—
Frontier Insurance Co. (N.Y.) 8/24/01 469 E
Reliance National Indemnity Co. (Wis.) 1/29/01 311 E
United Capitol (Ill.) 9/12/01 197 D

A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak

All four of the banks and thrifts that failed last year had received a Weiss Safety Rating of "Weak" or lower. Those bank failures were:

Company Date of
Failure
At Date of Failure
Total Assets
($ Mil)
Weiss
Safety Rating
Superior Bank FSB (Oakbrook Terrace, Ill.) 7/27/01 2,300 E—
Sinclair NB (Gravette, Ark.) 9/7/01 31 E—
First Alliance Bank & Trust Co. (Manchester, N.H.) 2/2/01 18 E—
Malta NB (Malta, Ohio) 5/3/01 10 E+

"What's not yet apparent in the failure statistics is the earnings weakness in each of the financial sectors," added Dr. Weiss. "Compared to this time last year, profits are down at more than half of all banks and insurance companies, indicating a need for caution ahead."

To avoid future failures, Dr. Weiss advises businesses and consumers to monitor the financial health of their HMO, insurance company, or bank using safety ratings with a solid track record for accuracy. The Weiss ratings are based on an analysis of a company's capital, profitability, quality of investments, liquidity, and stability.

Weiss issues safety ratings on more than 15,000 financial institutions, including life and health insurers, HMOs, Blue Cross Blue Shield plans, property and casualty insurers, banks, and brokers. Weiss also issues investment ratings on more than 11,000 mutual funds and 9,000 common stocks. 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, businesses, and libraries.

Consumers needing more information on the financial safety of a specific company can purchase a rating and summary analysis for as little as $7.95 through the Weiss Ratings web site at www.WeissRatings.com, or starting at $15 by calling (800) 289 9222.


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