NU Online News Service, Sept. 19, 6:32 p.m. – Fitch Inc. has downgraded 35 life insurance companies, or 42% of the 83 companies in its life company universe.

The downgrades are not the result of any significant deterioration at specific insurers, but rather the result of a change in the life industry outlook and a change in analysts’ long-term perspective on the ratings, according to Julie Burke, a managing director in the Fitch office in Chicago.

No company was downgraded by more than two notches, and Burke emphasized during a conference call that the downgrades were “not deep shifts,” but rather “modest adjustments” to life insurer ratings.

Burke could not say whether Fitch was conducting similar sweeping reviews of other financial services industries.

Mutual insurers and companies selling traditional whole life products fared the best.

Of six “AAA”-rated insurers, two, were property-casualty groups and four were life insurance groups. All of the AAA-rated life insurers were mutual companies that could be managed conservatively, free of pressure to meet shareholder interests, Burke said.

The breakout of the Fitch universe of rated life insurance companies is as follows: 8%, “AAA”; 10%, “AA+”; 21%, “AA”; 25%, “AA-”; 13%, “A+”; 14%, “A”; 4%, “A-”; 1%, “BBB+”; 1%, “BBB”; 3%, “BBB-” or lower.

Even with the ratings changes, Fitch’s average adjusted estimate of Dec. 31, 2001, risk-based capital for the rated life insurers was 300% to 325%.

Fitch adjusted RBC criteria established by the National Association of Insurance Commissioners, Kansas City, Mo., by 25 basis points, or a quarter of a percentage point, to reflect holdings of nonguaranteed separate account assets.

In addition to risk-based capital ratios, the ratings reflect the recent troubles in the capital markets and the business risk associated with specific products, Burke said.

When asked to rank products from the least to most risky, Burke listed them as follows: traditional whole life; universal life, term life and variable-universal life; group life; group pension products; individual fixed products; individual variable products; institutional products, such as guaranteed investment contracts; and health products such as disability insurance and long-term care insurance.