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The property/casualty and life/ health insurers that have best balanced profitability and solvency over the past five years comprise the Ward's 50 Benchmark Groups.

When either profitability or solvency for a Ward's 50 insurer is analyzed in isolation, the result may not rank the insurer among the 50 best in the property/casualty or life/health industry.

The combination of sustained solvency and performance over five years sets a Ward's 50 insurer apart from other insurers.

Each year, Ward Financial Group, a Cincinnati-based insurer management consulting and investment banking firm, identifies the leading companies for its benchmark groups and develops numerous aggregate financial measures for each group of 50 insurers. Risk and employee benefit managers then can compare the strength and performance of their insurers to the benchmark groups using the two statistics-packed Ward's Results volumes the consulting firm produces annually.

The reports compare the Ward's 50 companies with other insurers and peer groups that are categorized by product mix, premium level, location and type of ownership. Ward Financial identifies 41 peer groups for property/casualty insurers and 27 peer groups for life/health insurers.

Ward Financial's evaluation is based solely on data insurers provide in statutory financial results filed with state insurance regulators. Rating agencies, by comparison, develop their rates by also factoring in qualitative assessments of insurer management.

In the latest editions of Ward's Results, 2,698 property/casualty and 1,433 life/health insurers licensed in the United States are analyzed in full. The reports also provide limited analysis on 1,458 additional property/casualty insurers that reported less than $10 million of earned premium in 1997 and 303 additional life/health insurers with less than $5 million of assets last year.

Each Ward's 50 insurer is tested for the safety and the consistency of its financial performance. Failing one of those tests eliminates the company from further consideration. To pass this phase, insurers must:

* Have been in operation for at least the past five years.

* Have written at least $50 million of net premiums annually on average over that period and have at least $50 million of surplus.

* Have reported net income in four of the past five years. A lone annual loss may not have exceeded 10% of surplus.

But Ward Financial adjusts the net income figures it uses to reflect some operational items that normally are recorded directly to surplus. Those items more truly reflect operating performance, explained Chairman John L. Ward.

For example, for all insurers, Ward Financial figures into net income unrealized capital gains or losses, changes in non-admitted assets and changes in provisions or liabilities for reinsurance they have purchased.

For mutual life/health insurers, up to 1% of surplus is apportioned to net income, though no adjustment exceeds an actual policyholder dividend. Without that adjustment, life/health stock companies would have an unfair advantage over life/health mutual insurers in this part of the analysis, Mr. Ward explained. That's because under standard accounting practices, 100% of a mutual insurer's dividend is treated as an income-reducing expense, whereas stock companies' dividends reduce their surplus.

Ward Financial uses the 1% figure because that is the typical portion of a stock insurer's dividend that represents a return of capital, Mr. Ward said. The same adjustment is not made to net income for mutual property/casualty insurers because they rarely pay dividends.

* Have achieved a minimum risk-based capital ratio, which Ward Financial derives by using a formula similar to the one state regulators use. The minimum is 100% for property/ casualty insurers and 150% for life/ health insurers. The difference in the ratios makes a comparable number of insurers in each industry segment eligible for the analysis.

* Not have a fluctuation in net written premiums exceeding either a 40% compound annual increase or a 10% annual compound decrease.

Insurers that survive those tests then are analyzed for returns on average equity and average assets and for total revenue. The top 50 insurers in each market segment comprise the Ward's 50 Benchmark Groups.

Ward Financial does not rank how each Ward's 50 insurer fared against others in its industry group. Instead, the results of all 50 insurers in each group are used as benchmarks for other insurers in that industry segment.

Not every insurer in the two Ward's 50 groups is identified by its full legal name. That is because in some cases, the listed insurance entity consists of two or more affiliated companies that form a group within a larger insurance holding company.