WEISS RATINGS

Life and Health Insurers' Profits Up 32.8% in First Quarter 2002

PALM BEACH GARDENS, Fla., September 16, 2002 - 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., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

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 2002. Also contributing to the industry's first quarter profitability were declines in policy surrenders, life claims, and annuity claims.

Life and health insurers reporting the largest increases in net income were:

Company Domicile
State
Weiss
Safety
Rating
Net Income (Loss) ($Mil)
1st Qtr
2002
1st Qtr
2001
Change
Metropolitan Life Insurance Co. N.Y. B+ 391.4 214.8 176.6
American General Life Insurance Co. Texas B 194.7 20.4 174.3
Sun Life Assurance Co. of Canada (US) Del. B- 29.9 (144.2) 174.2
Nationwide Life Insurance Co. Ohio B+ 45.8 (84.0) 129.8
ING Life Insurance & Annuity Co. Conn. C+ 71.5 (52.8) 124.4
IDS Life Insurance Company Minn. B 83.0 (40.6) 123.6
Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak

"Insurers' revenues were buoyed by an increase in life insurance sales in the months following the September 11 terrorist attacks," commented Melissa Gannon, vice president of Weiss Ratings, Inc. "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."

Industry Capital Shrinks

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 (AVR) liability - an increase required by state regulators to protect against future investment losses.

Junk Bond Holdings Up Eight Percent

Investments in junk bonds totaled $117.1 billion at the end of first quarter 2002, up eight percent compared to last year, as companies sought higher yields to support payouts on investment products. Companies reporting the largest increase in junk bond holdings were:

Company Domicile
State
Weiss
Safety
Rating
Junk Bond Holdings ($Mil) As % of
Capital
& AVR
1st Qtr
2002
1st Qtr
2001
Change
AIG Annuity Insurance Co. Texas B 2,188.7 1,213.3 975.4 139.1
Teachers Ins. & Ann. Assoc. of Amer. N.Y. A+ 7,051.0 6,208.6 842.4 62.6
SunAmerica Life Insurance Co. Ariz. B- 2,558.6 1,904.4 654.2 113.9
Allstate Life Insurance Co. Ill. B+ 2,567.9 1,991.6 576.3 87.0
Pacific Life Insurance Co. Calif. A 1,791.5 1,238.5 553.0 76.1
Variable Annuity Life Insurance Co. Texas B+ 2,040.3 1,630.7 409.6 132.5
Security Life of Denver Insurance Co. Col. B- 851.1 468.9 382.3 123.8
Reassure America Life Ins Co. Ill. C- 378.9 0.0 378.9 80.9
John Hancock Mutual Life Insurance Mass. A- 4,561.1 4,194.0 367.1 98.5
New York Life Ins. & Annuity Co. Del. A- 1,658.4 1,292.8 365.7 105.5
Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak

"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 1990s," added Ms. Gannon.

Notable Upgrades and Downgrades

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

American Family Life Assurance Co. of Columbus (Neb.) from C to B-
• MetLife Investors Insurance Co. (Mo.) from C to B
• Northern Life Insurance Co. (Wash.) from C+ to B-

Notable downgrades include:

Associates Financial Life Insurance Co. (Tenn.) from B+ to B
• Great Southern Life Insurance Co. (Texas) from C to D+
• Protective Life Insurance Co. (Tenn.) from B- to C+

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.

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 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 www.WeissRatings.com, or starting at $15 by calling 800-289-9222.


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