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June 23, 2004 at 08:00 PM
Fitch Ratings Ltd., New York, is starting to calculate just what a great year 2003 was for U.S. life insurers.[@@]
Low interest rates were tough on sellers of some types of products, such as long-term disability insurance, but, overall, the stabilization of the investment markets cut losses realized on investments sold, written down or written off during the year to $3 billion, from $12 billion in 2002, according to a review written by Fitch analyst Julie Burke.
U.S. life insurers sucked $1 billion in capital from their holding companies and parent companies in 2002, but they did well enough in 2003 that dividend payments were $5 billion greater than capital contributions.
Although BBB-rated bonds paid only 1.31 percentage points more than comparable Treasury bonds at the end of 2003, down from a spread of 2.58 percentage points at the end of 2002, the high-yield default rate fell to 5%, from 16%, and companies that looked like goners in 2002 recovered enough to increase the recovery rate on defaulted bonds to 44%, from 22%.
