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A.M. BEST ISSUES REPORT ON LIFE/HEALTH INSURANCE 1992 RESULTS WITH PREVIEW OF 1993

 OLDWICK, N.J., Feb. 24 /PRNewswire/ -- The majority of life/health insurers approached 1992 as a year of retrenchment. The outcome was an industry-wide effort to regain the public and political confidence that had been greatly reduced due to financial impairments and preventative state regulatory actions taken against several high-profile companies in 1991. According to A.M. Best Company, life/health insurance industry earnings, after taxes, were approximately $13.2 billion at the close of 1992, which is consistent with the level of profits reported by the industry a year earlier. Moreover, indications are that the industry reported a pre-tax profit of $19.6 billion during the year, a 7 percent increase from the $18.3 billion reported in 1991. Life/health insurance industry results for 1992 and projections for 1993 were released today by A.M. Best Company in a report titled "Review of 1992 -- Preview of 1993," published as a special supplement to the weekly Best's Insurance Management Reports.
 The maintenance of a favorable level of earnings in 1992 was largely reflective of actions taken by the majority of company managements to control expenses and concentrate on improving important business fundamentals. In addition, many chief executives made significant efforts in 1992 to enhance their companies' balance sheet quality. However, offsetting the benefits derived from the operational improvements were the lingering real estate related problems, lower interest rates available on new investments, increased taxes and generally weak economic conditions. In spite of these constraints, profits from operations contributed to an estimated 9.4 percent increase in statutory capital and surplus funds, raising the life/health industry's aggregate level of capitalization to approximately $113.3 billion from $105.8 billion in 1991.
 Capital and surplus funds, which represent the industry's net worth, do not include the additional invested asset reserves that life/health insurers are required to establish under statutory accounting guidelines. The additional reserve requirements were significantly expanded during the year. Although the industry's surplus growth during 1992 was lower than the prior year's level of 13.6 percent, A.M. Best views 1992's increase as favorable due to the continued efforts which companies have made to reduce their balance-sheet and product risks. Best estimates that the risk-adjusted capital positions of many companies have continued to strengthen significantly over the past 24 months.
 Some of the highlights of the report are listed below:
 -- The vast majority of life/health insurance company managements renewed their efforts to refocus strategically and operationally on business fundamentals.
 -- Strategies to improve asset quality and liquidity remained a high priority for many company managements.
 -- Additional reductions in the overall level of junk-bond holdings were reported during 1992, falling from a high of 6.8 percent of admitted assets in 1990 to an estimated 3.5 percent in 1992.
 -- Significant problems persist for companies with excessive concentrations in commercial mortgage and real estate investments. A.M. Best estimates that the percentage of nonperforming mortgages has approximately doubled over the past three years, increasing from slightly more than 1 percent of invested assets in 1990 to more than 2 percent in 1992.
 -- A.M. Best estimates that in 1992 nearly two-thirds of the total mortgage and real estate investments were held by 50 companies. These 50 companies represent 37 percent of total industry assets and hold approximately three-fourths of the industry's total nonperforming loans.
 -- In the absence of external shocks, A.M. Best anticipates that life/health industry earnings will level off and begin to decline moderately during the year.
 -- The focus on capital preservation and generation will continue as risk-based capital standards become a reality during the year and the capital markets remain selective in providing cost-effective funding to the industry.
 -- State regulatory efforts to enhance solvency surveillance and respond to pressures concerning appropriate sales, pricing and marketing practices will progress at an increased pace.
 -- Insolvencies decreased from a high of 62 life/health insurers in 1991 to an estimated 32 failures in 1992. The vast majority of the year's insolvencies involved relatively small and young companies that maintained inadequate surplus, inappropriate pricing or became involved with questionable affiliated or reinsurance transactions.
 -- A.M. Best expects that the number and severity of life/health insurance company failures will continue to decrease in 1993 and beyond. However, the annual frequency rates will decline at a moderate pace and remain somewhat above the levels reported before 1989.
 -0- 2/24/93
 /CONTACT: Larry Mayewski of A.M. Best Company, 908-439-2200, ext. 5643/


CO: A.M. Best Company ST: New Jersey IN: INS SU: ECO

GK -- NY061 -- 0037 02/24/93 15:41 EST
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Date:Feb 24, 1993
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