Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, March 6, 1992 TAG: 9203060164
SECTION: BUSINESS PAGE: A-5 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
An analysis of the regulatory filings of 75 large life insurers - which represent 55 percent of the industry's total assets - showed an 18.5 percent jump in surplus capital last year, said Townsend & Schupp Co., a Hartford, Conn.-based consulting firm.
Surplus capital is the amount of money an insurer has in addition to the reserves required by state regulators. Surplus is set aside to meet excessive policyholder claims and is the primary measurement of an insurer's financial strength.
Of the companies Townsend & Schupp reviewed, only four of 75 reported declines in surplus capital, compared with 32 of 107 in 1990.
Among the strongest gains last year, Jackson National saw its surplus rise 66 percent to $838 million; Nationwide's rose 50 percent to $754 million; and Transamerica Occidental's jumped 36 percent to $759 million.
The companies reported profits and net capital gains totaling $6.5 billion.
"1991 was one of the strongest years in the past decade," said the firm's Frederick Townsend.
With the stock market at record heights, many insurers had strong gains on their investments. Moreover, as interest rates fell and bond prices rose, the value of their investments in fixed-income securities was enhanced.
However, confidence in the insurance industry eroded last year, amid concerns over investments in real estate and high-risk junk bonds.
But Townsend called the fear sparked by the failure of five insurers last year "overblown."
That fear, which peaked with the seizures of Executive Life Insurance Co. and Mutual Benefit Life Insurance, prompted many consumers to cash in their policies.
In another fallout from the failures, rating agencies were criticized for not anticipating them. These agencies, which assess the ability to pay claims, became aggressive in cutting ratings thereafter.
Prudential, the nation's largest life insurer, had an operating gain of $852 million and net capital gains of $658 million, Townsend & Schupp said. Still, the insurer lost its coveted triple-A bond rating from Moody's Investor Service Inc.
***CORRECTION***
Published correction ran on March 19, 1992\ An Associated Press business page graphic showing the financial strength of major U.S. insurance companies contained an incorrect figure for John Hancock Mutual Life Insurance Co. The company's surplus capital was $1.9 billion in 1991, up from $1.7 billion in 1990.
\
Memo: Correction