Life, health insurers' profits drop in 2001 - In the News - Brief Article - Statistical Data Included

Healthcare Financial Management, Jan, 2002

Profits of U.S. life and health insurers dropped $6 billion during the first six months of 2001, down 42 percent from the first six months of 2000, according to Weiss Ratings, Inc., Palm Beach Gardens, Florida. The industry's return on assets during the first six months of 2001 fell 44 percent to 0.51 percent, and its return on equity for the same period fell 45 percent to 7.3 percent, with the latter falling below 10 percent for the first time since 1995. The profit declines resulted primarily from a $2.2 billion capital loss on the sale of invested assets and a $3.1 billion decline in overall operating profits.

All of the declines began in the first quarter of 2001, long before the events of September 11, and well before the onset of the economic recession, which is officially pegged to March 2001, according to Weiss Ratings. With the recession deepening in the second half of 2001 and continuing into 2002, more profit declines are likely as consumers delay the purchase of insurance, which frequently is viewed as a nonessential item, the rating agency noted.

The Weiss safety ratings are based on an analysis of a company's risk-adjusted capital, five-year historical profitability, quality of investments, liquidity, and stability. The stability category combines factors such as asset growth, premium growth, strength of affiliate companies, and risk diversification.