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NEW YORK-New claims-paying-ability ratings indicate that the U.S. and Canadian life/health insurance industry in general is strong, but Standard & Poor's Insurance Rating Services maintains a "neutral to slightly negative outlook" for health and disability insurers.
New York-based S&P on July 1 rated 1,087 life/health insurers and determined that 729, or 67%, are secure. They represent 97%, or $1.83 trillion, of the rated companies' $1.9 trillion of assets. S&P rated the remaining 358 companies as vulnerable. They represent 3%, or $56.74 billion, of the rated companies' assets.
The secure to vulnerable ratio is comparable to last year's.
Among the 1,087 rated companies, S&P issued 763 quantitative ratings, which are denoted by a "q" after the ratings. A quantitative rating means S&P relied solely on the financial data the companies submitted in their 1996 annual statements to regulators.
Of those companies, S&P rated 421, or 55.2%, secure. They represent 77%, or $178 billion, of the assets of companies in that rating category.
For the first time, S&P assigned its highest possible quantitative rating. Centurion Life Insurance Co., a Missouri-domiciled captive of Norwest Financial Services Inc. of Des Moines, Iowa, earned an AAAq, or superior, rating.
S&P rated the remaining 342 companies with quantitative ratings as vulnerable. They represent 23%, or $54 billion, of the assets of companies in that category.
Of the 309 insurers that sought interactive ratings, S&P rated only one as vulnerable. An interactive rating couples an insurer's financial data with information S&P derives during interviews with insurer management.
S&P's less than optimistic outlook for health insurers is based on the competition that continues to dog that segment. As the shift to managed care continues faster than expected, insurers are building and trying to maintain market share.
Poor morbidity rates on business written during the 1980s continues to hurt disability insurers as well. But, downgrades in that segment will be tempered somewhat by strengthened underwriting, improved products and industry consolidation and restructuring, S&P said.
S&P plans to publish the ratings this summer.