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A tidal wave of red ink: 100 biggest companies hit by $100 billion of net capital losses.

[ILLUSTRATION OMITTED]

OPERATING DATA FOR THE TOWNSEND 100 Composite of the 100 largest U.S. life insurance companies, comprising 85% of industry assets, shows $100 billion of net capital losses, $70 billion of new capital infusions, an $816 million net operating loss, and a 12% decline in total surplus funds in 2008.

Net capital losses of $100 billion in 2008 consumed 33% of surplus funds available on January 1, 2008, according to data from Insurance Consulting & Analysis, LLC. But the surplus decline was held to 12% after parent companies paid in $70 billion of new surplus in 2008, compared to a total $65 billion for the previous 11 years (1997-2007).

Table 1 shows the components of surplus changes for the Townsend 100 Companies for the last 5 years. Surplus includes the asset valuation reserve and the interest maintenance reserve, while operating gain excludes amortization of the interest maintenance reserve.

While financial turmoil in 2008 caused both realized and unrealized capital losses in the bond and stock portfolios of major life insurers, the loss of investment income on bonds and stocks turned a record $30 billion of operating earnings in 2007 into an operating loss in 2008. In the 20-year history of this series of reports, the life industry has never come close to reporting an operating loss.

While surplus infusions in 2008 exceeded total infusions for the past decade, the Townsend 100 Companies preserved capital by reducing shareholder dividend payments to $16.9 billion in 2008, well below aggregate dividends paid in each of 2005-2007.

Table 2 shows new surplus paid-in, shareholder dividends paid out, and the net result, for the Townsend 100 Companies for the last 12 years. Net surplus paid-in of $53 billion in 2008 nearly offset the $59 billion of net surplus paid-out in 2005-2007.

Table 3 shows net investment yield on mean invested assets, return on mean equity, and the capital ratio (total surplus to invested assets) for the Townsend 100 companies for the last 12 years.

Net investment yield declined 179 basis points from 1997 to 2005, from 7.66% to 5.87%, but recovered 7 basis points to 5.94% in 2007. The decline of 43 basis points in 2008, to a 5.51% industry yield, is the largest decline since drops of 51 and 47 basis points in 2002 and 2003, respectively, and the lowest industry yield ratio in 45 years.

Spurred by the decline in investment yield, return on mean equity was negative in 2008, following 5 consecutive years of 10% and 11% ROE's for the life industry.

Capital ratios peaked at 12% at 12/31/99, then retreated to 11.6% at 12/31/07, before falling below 10% in 2008 (for the only time in the last 12 years).

The large table on page 18 shows the components of surplus changes for each of the individual companies in the Townsend 100.

While 22 of the Townsend 100 Companies had operating gains exceeding $500 million in 2007, only 14 companies reached this level in 2008.

Six companies earned more than $1 billion in 2008 (down from 8 companies in 2007): United Healthcare, $1.89 billion; AFLAC, $1.78 billion; American Life (DE), $1.24 billion; Northwestern Mutual, $1.12 billion; Teachers Insurance & Annuity, $1.11 billion; and Aetna Life, $1.06 billion.

Thirty-eight of the Townsend 100 Companies had an operating loss in 2008, compared to 8 and 13 companies in 2006 and 2007, respectively. Operating losses exceeded $500 million for 14 companies, passed $1 billion for 7 companies, and were more than $2 billion for three companies: Hartford Life & Annuity, $2.9 billion; AXA Equitable, $2.8 billion; and Hartford Life, $2.2 billion.

Only 3 companies had net capital gains exceeding $500 million in 2008 (down from 6 companies in 2007): Hartford Life, $1.66 billion; Riversource, $718 million; and Pacific Life, $504 million.

Ninety of the Townsend 100 Companies reported a net capital loss in 2008, compared to 88, 48, 31, 46, 44 and 58 companies, respectively, in 2002-2007. Largest net capital losses were posted by 3 subsidiaries of American International Group: AGC Life (a holding company for other AIG life subsidiaries with unrealized losses), $21.17 billion; AIG Annuity, $9.46 billion; and American General (TX), $9.38 billion. While 21 companies each had total net capital losses exceeding $1 billion, 3 of the 21 companies had realized losses of less than $400 million. Largest realized net capital losses were: AIG Annuity, $8.13 billion; Variable Annuity, $4.73 billion; Teachers Insurance & Annuity, $4.45 billion; American General (TX), $4.16 billion; and Sunamerica Life, $2.73 billion.

Thirty of the Townsend 100 Companies reported both operating losses and net capital losses in 2008, compared to 11, 12, 20, 4, 3, 5, 1 and 7 companies, respectively, for 2000-2007.

Sixty-four of the Townsend 100 Companies paid in new surplus funds of $70.4 billion in 2008, up from 41 companies paying in $4.6 billion in 2007. Five AIG subsidiaries had paid-in surplus exceeding $3.7 billion per company.

In 2008, 48 of the Townsend 100 Companies paid shareholder dividends of $16.9 billion, down from 65 companies paying $21.4 billion in 2007 and 72 companies paying $21.6 billion in 2006. Shareholder dividends exceeded $1 billion for: United Healthcare, $2.195 billion; Great-West Life & Annuity, $1.77 billion; General American, $1.318 billion; Metropolitan Life, $1.318 billion; and AFLAC, $1.06 billion.

Only 10 companies paid more than $500 million, and only 28 of the Townsend 100 Companies paid more than $100 million in shareholder dividends in 2008, compared to 17 and 28 companies in 2007, and 14 and 44 companies, respectively, in 2006.

Largest aggregate surplus gains in 2008 were: New York Life & Annuity, $847 million; MetLife Insurance Company CT (formerly Travelers), $846 million; Genworth Life Insurance, $601 million; Principal Life, $539 million; and Aetna Life, $385 million. Largest percentage surplus gains in 2008, excluding new surplus paid-in, were MetLife Insurance Company CT, 16%; Monumental Life, 12%; Principal Life, 12%; and Midland National, 9%. Seventy of the Townsend 100 Companies had surplus declines in 2008, compared to 33 companies in 2007.

The largest percentage surplus declines, and causes, were AXA Equitable (operating and capital losses), 54%; General American (shareholder dividends), 50%; MONY Life (capital losses), 47%; and Great-West Life & Annuity (shareholder dividends), 46%.

Frederick S. Townsend, president of the Townsend Independent Actuarial Research Alliance (TIARA), produces due diligence reports on life insurance companies and can be reached at ftownsend@snet.net. Laurie Dallaire can be reached at ldallaire@ic-a.com.
TABLE 1
SURPLUS CHANGES
Townsend 100 Life Insurance Companies
($Millions)

                        2004      2005      2006      2007      2008

Beginning Surplus    228,757   254,184   263,287   287,820   307,263
Operating Earnings    26,849    28,040    26,338    30,387      -816
Net Capital Gains     10,045     5,861     9,697      -372  -100,344
Surplus Paid-In        5,541    -2,190     1,623     4,640    70,424
Shareholder          -14,924   -20,748   -21,552   -21,428   -16,924
  Dividends
All Other Changes     -1,008    -2,099    -1,314     5,160    10,674
Ending Surplus       255,261   263,048   278,080   306,207   270,277
Percentage Change      11.6%      3.5%      5.6%      6.4%    -12.0%

Source: Highline Data and Insurance Consulting & Analysis, LLC

TABLE 2
NET SURPLUS PAID-IN
($Millions)

                                   Net
       Surplus   Shareholder   Surplus
Year   Paid-In     Dividends   Paid-In

1997     4,280        -7,465    -3,184
1998     3,179        -9,389    -6,209
1999     4,052        -6,597    -2,545
2000    10,677        -9,775       902
2001    12,262       -18,944    -6,683
2002    13,357        -8,724     4,634
2003     7,142        -8,668    -1,526
2004     5,541       -14,924    -9,382
2005    -2,190       -20,748   -22,938
2006     1,623       -21,552   -19,928
2007     4,640       -21,428   -16,788
2008    70,424       -16,924    53,500

Source: Highline Data and
Insurance Consulting & Analysis, LLC

TABLE 3
INDUSTRY MEASURES

              Net    Return
       Investment   On Mean   Capital
Year        Yield    Equity     Ratio

1997        7.66%     9.17%   11.49%
1998        7.37%     6.81%   11.74%
1999        7.28%     7.99%   11.97%
2000        7.38%     9.33%   11.75%
2001        7.09%     6.57%   10.85%
2002        6.58%     8.50%   10.11%
2003        6.11%    11.09%   10.74%
2004        5.90%    11.09%   11.10%
2005        5.87%    10.84%   11.01%
2006        5.92%     9.73%   11.27%
2007        5.94%    10.23%   11.63%
2008        5.51%    -0.28%    9.97%

Source: Highline Data and
Insurance Consulting & Analysis, LLC

THE TOWNSEND 100 COMPANIES

12 MONTHS 2008 SURPLUS CHANGE
(84% of Industry Assets) (Data in $Millions; Sorted Alphabetically)

                              12/31/07                    Net
                              Surplus,                Capital   Surplus
                                   AVR   Operating      Gains      Paid
Company                          & IMR        Gain   (Losses)        In

AETNA LIFE INS. CO., CT          3,554       1,060      (247)       280
AGC LIFE INS. CO.                7,744        (11)   (21,169)    19,337
AIG ANNUITY                      4,878         325    (9,463)     7,643
AIG LIFE INS. CO.                  565          46    (1,086)       915
AIG SUNAMERICA LIFE              1,222       (609)        370       286
ALLIANZ LIFE OF N. AMER.         2,722         255    (1,372)       580
ALLSTATE LIFE, IL                3,188     (1,179)    (1,541)     1,350
ALLSTATE LIFE, NY                  502        (14)       (37)         0
AMERICAN EQUITY INV.             1,043         107      (112)         0
AMERICAN FAMILY LIFE ASSUR.      4,682       1,781      (581)         0
AMERICAN GEN'L L & A               667         207    (1,140)       793
AMERICAN GEN'L LIFE, TX          6,041         153    (9,382)     8,565
AMERICAN INT'L LIFE                679       (144)    (1,019)       952
AMERICAN INVESTORS, KS             686        (76)      (275)       385
AMERICAN LIFE INS. CO.           7,819       1,242    (4,558)       982
AMERICAN NAT INS. CO.            2,599          11      (556)         9
AMERICAN UNITED LIFE               735          22       (29)         0
AVIVA LIFE & ANNUITY CO.         1,354        (52)      (308)        95
AXA EQUITABLE LIFE               7,850     (2,764)    (1,314)       (3)
BANKERS LIFE & CAS., IL            814          78      (103)         3
CM LIFE INS. CO.                   687         (5)         10         0
CONNECTICUT GENERAL              2,273           8       (65)     1,384
COUNTRY LIFE INS. CO.            1,071          32      (113)         0
CUNA MUTUAL INS. SOCIETY         1,252         256      (425)         0
EMPLOYERS REASSUR.                 909       (591)      (127)       849
EQUITRUST LIFE INS. CO.            422        (37)       (81)        82
FARMERS NEW WORLD                  720         107      (155)         0
FIRST SUNAMERICA LIFE              509       (136)    (1,041)     1,212
GENERAL AMERICAN LIFE            2,300          60         65         0
GENWORTH LIFE & ANNUITY          1,699       (133)       (35)       615
GENWORTH LIFE INS.               3,570         278        204       589
GENWORTH LIFE OF NY                454       (108)       (94)       182
GREAT AMERICAN LIFE INS            792         163      (289)       125
GREAT-WEST L & A                 2,005         300       (61)         5
GUARDIAN LIFE                    4,549         252      (674)         0
HARTFORD LIFE & ACC.             5,912         604    (2,907)     2,512
HARTFORD LIFE & ANN.             2,603     (2,944)      1,661       209
HARTFORD LIFE INS. CO.           4,900     (2,174)      (534)     1,867
ING LIFE INS. & ANN.             1,780       (184)      (374)       365
ING USA ANNUITY & LIFE           2,730       (642)      (388)      (65)
JACKSON NATIONAL                 4,643       (323)    (1,313)         0
JOHN HANCOCK LIFE                5,929       (179)      (343)         0
JOHN HANCOCK LIFE (USA)          2,316     (1,877)      (358)       477
JOHN HANCOCK VARIABLE              696         111       (87)         0
LIBERTY LIFE OF BOSTON             574           4       (56)         0
LIFE INS. CO., SOUTHWEST           401           4       (32)        70
LINCOLN LIFE & ANNUITY             860          13      (130)         0
LINCOLN NATIONAL LIFE            5,877         503    (1,064)         0
MASS MUTUAL LIFE INS.            9,523         277    (1,082)         0
METLIFE INS. CO., CT             5,249         720      (938)         0
METLIFE INVESTORS USA              620       (440)       (22)     1,010
METROPOLITAN LIFE, NY           16,537         582      (629)         0
METROPOLITAN TOWER               1,199          81       (59)         0
MIDLAND NATIONAL LIFE            1,292         176       (96)        50
MINNESOTA LIFE INS. CO.          2,036        (16)      (329)        84
MONUMENTAL LIFE                  1,254         530      (295)        70
MONY LIFE INS. CO.               1,104          76      (312)         0
MUTUAL OF AMERICA                  998         (3)       (64)         0
NATIONAL LIFE INS. CO., VT         934          27       (70)         0
NATIONAL WESTERN                   756         28        (22)       (1)
NATIONWIDE LIFE INS.             2,798       (700)        198       320
NEW YORK LIFE INS. & ANN.        3,142       (128)      (259)     1,218
NEW YORK LIFE INS. CO.          14,483         409    (2,693)         0
NORTH AMERICAN CO L&H              456           7       (33)       150
NORTHWESTERN MUTUAL             16,494       1,123    (4,614)         0
OHIO NATIONAL LIFE                 850        (41)       (16)        24
OM FINANCIAL LIFE                  892         318      (915)       355
PACIFIC LIFE                     4,121     (1,243)        504         0
PENN MUTUAL LIFE                 1,414         (3)        (7)         0
PHOENIX LIFE                     1,085          54      (184)        15
PRIMERICA LIFE                   1,764         149         98       (3)
PRINCIPAL LIFE INS. CO.          4,428         692      (730)       (5)
PROTECTIVE LIFE INS. CO.         2,086        (72)      (396)       106
PROVIDENT LIFE & ACC.              609         116        (8)         0
PRUCO LIFE INS. CO., AZ            831       (522)       (57)       360
PRUDENTIAL INS. CO.             10,428         438    (2,507)     1,992
PRUDENTIAL RETIREMENT            1,752          15       (58)         0
REASSURE AMERICA LIFE              654         151      (281)       225
RELIASTAR LIFE INS. CO.          2,487          51      (446)       100
RGA REINSURANCE                  1,217          42      (118)        58
RIVERSOURCE LIFE                 3,086     (1,186)        718       323
SECURITY LIFE OF DENVER          1,499         235      (334)       210
SOUTHERN FARM BUREAU             1,752         125      (174)         0
STANDARD INS. CO.                1,124         232      (113)         2
STATE FARM LIFE                  6,186         326      (681)         0
SUN LIFE ASSUR. CN US            1,477       (737)      (642)     1,349
SUNAMERICA LIFE INS. CO.         5,917         532    (5,272)     3,789
SWISS RE LIFE & HEALTH           1,850         541      (562)     (155)
SYMETRA LIFE INS. CO.            1,663          79      (118)        50
TEACHERS INS. AND ANN.          22,865       1,107    (6,942)         0
TRANSAMER FINANCIAL                953       (328)        168       248
TRANSAMER LIFE                   6,336       (924)       (43)       493
UNION FIDELITY LIFE              1,497       (249)      (317)       400
UNITED HEALTHCARE                3,245       1,893      (112)         0
UNITED OF OMAHA                  1,454        (14)       (39)         0
UNUM LIFE OF AMERICA             1,670         265       (93)         0
USAA LIFE INS. CO.               1,085         118      (130)        93
VARIABLE ANNUITY LIFE            3,649         242    (5,552)     4,576
WESTERN & SOUTHERN               3,933         229      (776)         0
WESTERN-SOUTHERN                   750           9      (158)       270
TOWNSEND 100 CO. COMPOSITE     307,263       (816)  (100,344)    70,424

                                Share-             12/31/08       12
                                holder       All   Surplus,    Month
                                 Divi-     Other        AVR        %
Company                          dends   Changes      & IMR   Change

AETNA LIFE INS. CO., CT          (675)      (32)      3,939    10.8%

AGC LIFE INS. CO.                    0         2      5,903    -23.8%
AIG ANNUITY                          0     (141)      3,242    -33.5%
AIG LIFE INS. CO.                    0        24        465    -17.8%
AIG SUNAMERICA LIFE                  0        48      1,317      7.8%
ALLIANZ LIFE OF N. AMER.             0        19      2,204    -19.0%
ALLSTATE LIFE, IL                    0     1,629      3,447      8.1%
ALLSTATE LIFE, NY                    0       (6)        444    -11.4%
AMERICAN EQUITY INV.                 0       (2)      1,035     -0.7%
AMERICAN FAMILY LIFE ASSUR.    (1,062)      (90)      4,730      1.0%
AMERICAN GEN'L L & A                 0        66        593    -11.1%
AMERICAN GEN'L LIFE, TX              0       289      5,666     -6.2%
AMERICAN INT'L LIFE               (50)        41        458    -32.5%
AMERICAN INVESTORS, KS               0       224        943     37.5%
AMERICAN LIFE INS. CO.           (300)     (732)      4,454    -43.0%
AMERICAN NAT INS. CO.             (83)      (55)      1,925    -25.9%
AMERICAN UNITED LIFE                 0      (27)        702     -4.6%
AVIVA LIFE & ANNUITY CO.             0       242      1,331     -1.7%
AXA EQUITABLE LIFE                   0     (167)      3,603    -54.1%
BANKERS LIFE & CAS., IL          (113)        16        695    -14.6%
CM LIFE INS. CO.                     0        33        725      5.5%
CONNECTICUT GENERAL                  0   (1,229)      2,371      4.3%
COUNTRY LIFE INS. CO.             (10)      (25)        956    -10.8%
CUNA MUTUAL INS. SOCIETY             0        28      1,111    -11.3%
EMPLOYERS REASSUR.                   0     (244)        796    -12.4%
EQUITRUST LIFE INS. CO.              0        36        422      0.1%
FARMERS NEW WORLD                 (90)       (9)        573    -20.4%
FIRST SUNAMERICA LIFE                0         7        550      8.1%
GENERAL AMERICAN LIFE          (1,318)        37      1,144    -50.3%
GENWORTH LIFE & ANNUITY              0        15      2,162     27.2%
GENWORTH LIFE INS.               (300)     (171)      4,171     16.8%
GENWORTH LIFE OF NY                  0        19        453     -0.3%
GREAT AMERICAN LIFE INS           (73)        72        791     -0.2%
GREAT-WEST L & A               (1,772)       613      1,090    -45.6%
GUARDIAN LIFE                        0     (162)      3,965    -12.8%
HARTFORD LIFE & ACC.             (238)       221      6,105      3.3%
HARTFORD LIFE & ANN.             (156)       810      2,184    -16.1%
HARTFORD LIFE INS. CO.           (140)       254      4,174    -14.8%
ING LIFE INS. & ANN.                 0        71      1,658     -6.9%
ING USA ANNUITY & LIFE               0       306      1,942    -28.9%
JACKSON NATIONAL                 (313)     1,316      4,010    -13.6%
JOHN HANCOCK LIFE                (960)     (647)      3,801    -35.9%
JOHN HANCOCK LIFE (USA)              0     2,076      2,634     13.7%
JOHN HANCOCK VARIABLE             (25)     (101)        594    -14.7%
LIBERTY LIFE OF BOSTON               0        11        534     -7.1%
LIFE INS. CO., SOUTHWEST             0       (1)        441     10.0%
LINCOLN LIFE & ANNUITY               0        60        803     -6.6%
LINCOLN NATIONAL LIFE            (400)        21      4,936    -16.0%
MASS MUTUAL LIFE INS.                0       145      8,863     -6.9%
METLIFE INS. CO., CT             (500)     1,563      6,095     16.1%
METLIFE INVESTORS USA                0     (371)        797     28.5%
METROPOLITAN LIFE, NY          (1,318)     (125)     15,047     -9.0%
METROPOLITAN TOWER               (277)        13        956    -20.2%
MIDLAND NATIONAL LIFE             (47)        82      1,456     12.7%
MINNESOTA LIFE INS. CO.           (75)      (55)      1,646    -19.2%
MONUMENTAL LIFE                      0      (83)      1,476     17.7%
MONY LIFE INS. CO.                (95)     (194)        579    -47.5%
MUTUAL OF AMERICA                    0      (26)        906     -9.3%
NATIONAL LIFE INS. CO., VT           0      (29)        862     -7.7%
NATIONAL WESTERN                   (1)       (3)        757      0.0%
NATIONWIDE LIFE INS.             (247)       237      2,606     -6.8%
NEW YORK LIFE INS. & ANN.            0        17      3,989     27.0%
NEW YORK LIFE INS. CO.               0       340     12,539    -13.4%
NORTH AMERICAN CO L&H             (19)        56        617     35.1%
NORTHWESTERN MUTUAL                  0       611     13,613    -17.5%
OHIO NATIONAL LIFE                (62)        39        795     -6.4%
OM FINANCIAL LIFE                    0       155        805     -9.7%
PACIFIC LIFE                     (345)       586      3,623    -12.1%
PENN MUTUAL LIFE                     0        27      1,431      1.2%
PHOENIX LIFE                      (84)        12        897    -17.3%
PRIMERICA LIFE                   (353)     (101)      1,554    -11.9%
PRINCIPAL LIFE INS. CO.            (5)       587      4,967     12.2%
PROTECTIVE LIFE INS. CO.             0       241      1,966     -5.8%
PROVIDENT LIFE & ACC.             (80)      (45)        591     -2.9%
PRUCO LIFE INS. CO., AZ              0        33        645    -22.4%
PRUDENTIAL INS. CO.              (950)     (647)      8,754    -16.0%
PRUDENTIAL RETIREMENT             (40)       170      1,837      4.9%
REASSURE AMERICA LIFE            (120)      (82)        547    -16.4%
RELIASTAR LIFE INS. CO.              0      (46)      2,145    -13.7%
RGA REINSURANCE                    (3)      (90)      1,106     -9.1%
RIVERSOURCE LIFE                 (775)       620      2,786     -9.7%
SECURITY LIFE OF DENVER              0     (111)      1,499      0.0%
SOUTHERN FARM BUREAU               (0)      (82)      1,621     -7.5%
STANDARD INS. CO.                 (60)         6      1,190      5.9%
STATE FARM LIFE                    (0)     (389)      5,441    -12.0%
SUN LIFE ASSUR. CN US                0      (55)      1,391     -5.8%
SUNAMERICA LIFE INS. CO.             0     (205)      4,760    -19.5%
SWISS RE LIFE & HEALTH               0       192      1,866      0.9%
SYMETRA LIFE INS. CO.            (100)      (22)      1,552     -6.6%
TEACHERS INS. AND ANN.               0     1,557     18,588    -18.7%
TRANSAMER FINANCIAL              (300)       190        931     -2.3%
TRANSAMER LIFE                   (316)     1,040      6,585      3.9%
UNION FIDELITY LIFE                  0        36      1,367     -8.7%
UNITED HEALTHCARE              (2,195)        62      2,891    -10.9%
UNITED OF OMAHA                  (115)        17      1,302    -10.5%
UNUM LIFE OF AMERICA             (365)        39      1,515     -9.3%
USAA LIFE INS. CO.                   0       (6)      1,159      6.8%
VARIABLE ANNUITY LIFE                0        25      2,940    -19.4%
WESTERN & SOUTHERN                   0      (23)      3,362    -14.5%
WESTERN-SOUTHERN                     0         1        871     16.2%
TOWNSEND 100 CO. COMPOSITE    (16,924)    10,674    270,277    -12.0%

Source: Highline Data and Insurance Consulting & Analysis, LLC
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Title Annotation:INDUSTRY RESULTS
Author:Townsend, Frederick S.
Publication:National Underwriter Life & Health
Geographic Code:1USA
Date:Apr 6, 2009
Words:3266
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