Capital gains of the nation’s life and health insurers jumped 87.4% in the first three months of 2005, compared to a year ago. [@@]

But overall profits in the industry dipped 5.3% according to Weiss Ratings Inc., Jupiter, Fla. Capital gains for the first quarter came in at $474.8 billion, an increase of $221.4 million.

This is the second year in a row the industry has reported positive first quarter investment results, following 3 years of large capital losses.

Flat product sales and an increase in policy surrenders dampened the effect of the capital gains boost, said Melissa Gannon, Weiss vice president.

“However, industry profits remain at near-record levels,” she said.

As a result of improved equity markets, insurers reported a 9% increase in separate account holding, reflecting renewed interest in variable life and annuity products. Separate accounts rose to $1.3 trillion in the first quarter, compared to $1.2 trillion in the first quarter of 2004, the industry reported.

Insurers’ junk bond portfolios declined 11% from $137.8 billion in the first quarter of 2004 to $126.8 billion this year, resulting in a reduction of junk bonds to invested assets to 4.52%.