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Moody's: 2002 Bond Losses Exceed 7% Of Statutory Capital

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NU Online News Service, Oct. 20, 2003, 6:45 p.m. EDT – Bond-related losses at the U.S. life insurers rated by Moody’s Investors Service, New York, amounted to $15.4 billion, or 7.26% of statutory capital, in 2002, up from $8.9 billion, or 4.22% of statutory capital, in 2001.

When Moody’s analysts looked at the insurers that ranked in the bottom 25% in terms of bond losses as a percentage of statutory capital, it found that losses at those companies amounted to at least 6.94% of capital in 2001 and at least 11% of capital in 2002.

Losses at the worst-rated insurers reached 27.18% of statutory capital in 2001 and 46.58% of statutory capital in 2002.

A four-analyst team in New York compiled the report, which includes appendices that show bond gains and bond losses as a percentage of invested assets and statutory capital for all Moody’s rated insurers.

Credit-related bond losses eased in 2002, but credit-related bond losses have been a problem for some life insurers, and they have exerted “a heavy downward pressure on the credit ratings of some companies,” the Moody’s analysts write.

The analysts write that they believe some insurers have used interest rate-related gains to offset the effects of credit losses primarily for window dressing purposes.

Some life insurers may still be waiting to disclose significant credit losses, the analysts write.