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 BOSTON, March 18 /PRNewswire/ -- The New England, one of the

nation's larger insurance and investment firms, recorded a 25 percent increase in profits in 1992, announced Robert A. Shafto, president and CEO, at the company's annual meeting on March 18.
 The company's net income -- the equivalent of profit in insurance accounting -- exceeded $48 million, up from $38 million in the previous year, he said. That profit came after paying its policyholders $293 million in dividends out of total earnings of more than $340 million.
 "Last year's economy was challenging, not an easy one in which to produce profits. Nonetheless, we were able to increase our profitability by a fairly substantial margin, thereby increasing further the company's financial strength," said Shafto.
 In addition to increased profits, total sales of all products sold by The New England -- insurance, employee benefit, and investment products -- were up 3 percent, as measured by field compensation. "Because of the economy's weakness last year, these overall sales increases are reassuring evidence of the company's ability to move forward in a down economy," Shafto continued.
 A number of the company's major product lines ignored the economic downturn altogether and posted substantially higher sales, Shafto noted. For example, the company experienced a 19 percent increase in new sales of group life and health insurance, an 11 percent increase in new pension sales, and a 63 percent jump in investment product sales (not including money market funds), he said.
 One exception was individual insurance, where premiums from new sales followed industry-wide trends and dropped off 5 percent, said Shafto. However, total individual premiums, which includes recurring premiums from policies sold in prior years, were up 6.4 percent, he added.
 "The vast majority of life insurers are weathering the economic slowdown in relatively good shape," said Shafto, citing credit ratings as proof. "Many major companies had their ratings lowered last year, but generally only by small degrees. Their new ratings remained in the excellent financial strength range for the most part," he continued.
 "Basically, rating agencies are saying the recession's impact on most major life insurers has been minor. The bulk of the industry is rated "AA," making it one of the nation's more highly rated," Shafto said. The New England, he noted, was among those life insurance companies whose ratings, while adjusted slightly, remained in the excellent or "AA" and higher categories.
 More conservative investment practices are the principal reason the insurance industry has escaped the depth of problems the recession has caused other financial industries, Shafto believes. "The group of insurers with did get in trouble generally were risky investors, and therefore were anomolies within our industry for taking such risks," said Shafto.
 In the long run, Shafto predicted the recession will result in a financially stronger industry as companies react to the economy by belt-tightening, adjusting their investment portfolios, boosting productivity, and building customer responsiveness.
 In The New England's case, Shafto said the company's investment portfolio was repositioned: more liquidity, more high quality bonds, fewer commercial mortgages. To economize, $16 million in Home Office expenses were saved in the last two years. Also, to increase customer satisfaction to an industry-leading level, a "Quality Initiative" was instituted, he added.
 Since a full economic recovery is unlikely this year, the investment portfolio strategy will be continued as will the company's stringent expense controls, Shafto continued.
 As with other insurers, the ecomomy's effect showed up mainly in real estate-related investments, Shafto stated. Writedowns were up, reflecting the recession's first full year of impact, he said. However, earnings from real estate continue to offset writedowns by a wide margin, $50 million in writedowns vs. $475 million in earnings, including $90 million in capital gains income from real estate sales, Shafto added. Additionally, the company's real estate portfolio contains another $425 million in unrealized capital gains that could be taken as profit, he said.
 Also, a 50 percent federal tax increase on life insurance companies, along with lower interest rates which reduces investment income are causing life insurers to adjust their dividend scales accordingly. In the case of The New England, it lowered its dividends by about 5 percent, or $16 million. The New England has one of the industry's best dividend histories according to independent studies, Shafto said. Its new dividend scale remains highly competitive, he said.
 In its asset management business, The New England was profitable as well. Its asset management subsidiary, New England Investment Companies (NEIC) contributed $19 million in profit. Through a family of asset management firms, NEIC manages more than $55 billion in assets, including $11 billion for The New England, making it one of the nation's larger asset managers.
 -0- 3/18/92
 /CONTACT: Peter Harrington of The New England, 617-578-2729/ CO: The New England ST: Massachusetts IN: FIN SU:

EG-SH -- NE001 -- 9168 03/18/92 10:59 EST
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Publication:PR Newswire
Date:Mar 18, 1992

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