Newspaper article THE JOURNAL RECORD

Insurers Mark Passing of Profitable Year

Newspaper article THE JOURNAL RECORD

Insurers Mark Passing of Profitable Year

Article excerpt

NEW YORK (AP) _ Despite the high-profile failures of a handful of insurance giants that shocked policyholders in 1991, the industry overall enjoyed an extremely profitable year, new data shows.

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 out of 75 reported declines in surplus capital; in 1990, 32 out of 107 reported lower surplus.

Among the strongest gains last year, Jackson National saw its surplus rise 66 percent to $838 million; Nationwide's surplus rose 50 percent to $754 million, and Transamerica Occidental jumped 36 percent to $759 million.

Further, the companies reported profits and net capital gains totaling $6.5 billion.

"1991 was one of the strongest years in the past decade," said Frederick Townsend, a principle of the firm. 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 insurers' investments in fixed-income securities was enhanced.

Throughout 1991 confidence in the industry eroded amid concerns over insurers' investments in real estate, commercial mortgages and high-risk junk bonds.

But Townsend characterized the fear sparked by the failure of five insurers last year as "overblown."

This fear, which peaked with the seizures of Executive Life Insurance Co. and Mutual Benefit Life Insurance, prompted many consumers to cash in their policies. Industry analysts and anecdotal evidence from insurance companies indicate that redemptions stabilized in the final quarter, however.

In another fallout from the insurance failures, rating agencies were criticized for not anticipating them. …

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