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Some of the numerous measures used in developing the Ward's 50 groups of the safest and most profitable property/casualty and life/health insurers illustrate how the groups differ from the remainder of the industry.

However, in several areas, the total industry is faring much better than it has in recent years compared with the Ward's 50 groups.

Ward Financial Group, a Cincinnati-based insurer management consulting and investment banking firm, identifies the Ward's 50 Benchmark groups of property/casualty and life/health insurers that have done the best job of balancing solvency and profitability over the past five years. The latest period was from 1993 through 1997.

In the latest comparison of property/casualty insurers, the Ward's 50 continues to report a lower combined ratio, a healthier return on average equity, a stronger risk-basked capital ratio and more surplus as a percentage of assets.

But, in some measures, the total industry has significantly narrowed the gap.

The risk-based capital ratio is one example. That ratio measures surplus adequacy by comparing an insurer's capital and surplus against the amount the insurer should have based on the risk profile of its business. Ward has set 150% as the minimum ratio a property/casualty insurer must achieve to qualify for the Ward's 50 group.

For the latest five-year period, the risk-based capital ratio was 202.2% for the Ward's 50 and a slightly weaker, though still strong, 195.6% for the total industry segment.

In previous years, the gap between the ratios for the two groups was much wider, often exceeding 50 percentage points.

The gap closed this year because three large insurer groups with lower -- though still strong -- ratios made the Ward's 50 list, explained John L. Ward, chairman of Ward Financial. Those insurer groups are Liberty Mutual Group, Nationwide Group and State Farm Mutual Group.

In the life/health segment, the Ward's 50 group beat out the total industry in, among other things:

* Return on average equity.

Insurers' performance in relation to their capital base "is the ultimate indicator" of their profitability, Mr. Ward said.

* Total stocks to invested assets.

Despite the current vacillation in the stock market, the market's strength during the past five years boosted the Ward's 50 group's investment returns. As a result, the Ward's 50 group's greater emphasis on stocks to invested assets is "a plus" for this analysis, Mr. Ward said.

* Individual life premiums as a percentage of total premiums.

The individual life premiums are more important than the individual annuity premiums, where the Ward's 50 lagged behind the total market, Mr. Ward said. The life products' profit margins are far greater than the margins on annuity products, he explained.

* General expenses as a percentage of premiums.

This was the first time the Ward's 50 group has beaten the industry in this measure, which "is very important for financial performance," Mr. Ward noted.

* The life lapse ratio, or the percentage of business lost at renewal. Insurers have to keep business on the books a long time to earn a payback on it, Mr. Ward said.

* Growth in surplus.

However, the total life/health industry performed better than the Ward's 50 group in several solvency measures.

For example, the total industry's 254.3% risk-based capital ratio was slightly stronger than the Ward's 50 group's 253.2% ratio for the 1993-1997 period. In addition, surplus as a percentage of assets was stronger for the total industry -- 11.3% -- than it was for the Ward's 50 -- 10.5%.

Mr. Ward said the risk-based capital ratio is a more insightful measure of solvency than surplus as a percentage of assets. He noted the risk-based capital ratios for the industry and the Ward's 50 are strong and have been improving in recent years.

Insurers have been improving that ratio largely by increasing their profitability as well as disposing of problem assets, according to Mr. Ward.

The total industry has been disposing of high-risk mortgage loans and real estate more quickly than the Ward's 50 has, but the total industry has had a bigger problem in that area. For the total industry, those high-risk assets accounted for 2.3% of invested assets for the latest five-year period, compared with 2.7% for the prior five-year period.

The Ward's 50 reported 2.1% of high-risk assets, down slightly from 2.2%.

"But, if all a company does is accumulate capital and sits on it, their performance starts to suffer," Mr. Ward said. He pointed out that the Ward's 50 has "done a better job of managing their strong capital base," which their higher return on equity shows.