Spurred by consumer appetite for variable life and annuity products, assets of the nation's life and health insurers increased $305 billion, or 6.7%, from $4.5 trillion at first quarter 2006, to $4.9 trillion at first quarter 2007, according to TheStreet.com Ratings, a wholly owned subsidiary of TheStreet.com, Inc. (NASDAQ: TSCM) a leading provider of financial commentary, analysis, research, news, and ratings.
This asset growth is primarily driven by strength in the sale of variable life and annuity products and the appreciation of the separate accounts in which those assets are held. Separate account assets jumped $213.2 billion, or 13.8%, from $1.5 trillion at first quarter 2006 to $1.8 trillion at first quarter 2007. Separate accounts comprise 36% of total industry assets.
Insurers with the largest year-over-year increase in separate account assets are:
| Â | Â | Â | Â | Â | Separate Account Assets ($Bil) | |||
| Company | Domicile | TheStreet.com | Total | Q1 | Q1 | $ | % | |
| Hartford Life Ins Co | Conn. | B | 148.9 | 113.1 | 95.3 | 17.8 | 18.7 | |
| John Hancock Life Ins Co | Mich. | B+ | 112.7 | 88.7 | 72.6 | 16.1 | 22.2 | |
| Riversource Life Ins Co | Minn. | B | 76.0 | 49.2 | 35.9 | 13.3 | 37.0 | |
| Prudential Ins Co of America | N.J. | B | 249.0 | 96.8 | 83.9 | 12.9 | 15.3 | |
| Axa Equitable Life Ins Co | N.Y. | B | 134.8 | 88.5 | 76.2 | 12.3 | 16.1 | |
| A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak | ||||||||
General account investments of stocks, bonds, mortgages, and real estate make up 61% of industry assets. These rose $87.5 billion, or 3.0%, from $2.9 trillion at first quarter 2006 to $3.0 trillion at first quarter 2007.
"The performance of the stock market through the first quarter of the year drove growth in equity-related insurance products such as variable life and variable annuity products," said Melissa Gannon, vice president of insurance and bank ratings for TheStreet.com Ratings. "These products are also increasingly popular with baby boomers."
Capital Gains and Premium Growth Drive Earnings Up
Industry earnings grew $300 million, or 3.2%, from $10.1 billion during the first quarter of 2006 to $10.4 billion during the first quarter of 2007. This represents a slowdown from last year's increase of 22.0%.
Earnings growth was primarily driven by an increase in realized capital gains from the sale of investments of $172 million, or 19.1%, from $0.9 billion during the first quarter of 2006, to $1.1 billion during the first quarter of 2007. This represents a deceleration in the growth of capital gains that have been in the high double digits for the past four years.
Likewise, premiums and deposits increased $5.7 billion, or 3.9%, from $143.7 billion during the first quarter of 2006, to $149.4 billion during the first quarter of 2007.
"An increase in demand for products offering secondary guarantees in universal life contracts is a contributing factor in the growth of premium volume. These products have become very popular in estate planning," commented Gannon.
Notable Upgrades and Downgrades
Of the 2,735 life and health insurers reviewed by TheStreet.com Ratings based on first-quarter 2007 data, 40 were upgraded and four were downgraded. The largest insurers with the most significant rating changes are listed below. Notable upgrades include:
-- | Â | AIG SunAmerica Life Assurance Co | Â | Woodland Hills, Ariz. | Â | to B from B- |
-- | Pruco Life Insurance Co | Phoenix, Ariz. | to B from C+ | |||
-- | Fidelity Investments Life Insurance Co | Salt Lake City, Utah | to A from A- |
Notable downgrades include:
-- | Â | Lincoln Life & Annuity Co of N.Y. | Â | Syracuse, N.Y. | Â | to B- from B |
-- | Globe Life & Accident Insurance Co | Wilmington, Del. | to B- from B | |||
-- | Resource Life Insurance Co | Chicago, Ill. | to C from C+ |
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TheStreet.com Ratings is a wholly owned subsidiary of TheStreet.com, Inc., that provides financial strength ratings for more than 8,500 financial institutions nationwide. Ratings are also available on more than 3,800 insurance companies including auto, homeowners, life, health, long-term care, Medicare supplement, and business insurers.
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