Life insurance industry earnings are likely to be up slightly in the first quarter, an industry analyst says.

A favorable stock market, rising yields and milder catastrophes are likely to help industry earnings, despite a slight increase in mortality over the year before, says Andrew Kligerman, an analyst with UBS Investment Research, New York.

Kligerman points to preliminary estimates showing strong sales growth for variable annuities. VA sales rose 17% in the first 2 months, he points out, compared to growth of less than 3% for all of 2005.

That will make up for weak fixed annuity sales, which Kligerman projects to be down 20% in the first quarter from a year earlier.

Kligerman also expects a modest rise in life insurance sales, based on a 1% to 2% increase in applications processed in the first 2 months of the year, according to MIB Group Inc. data.

[A new report from MIB shows applications processed in March were down over 7% from a year earlier. See article in today's Breaking News.]

Strong mutual fund sales could further buoy the industry, Kligerman says. He notes a 41% increase in fund sales and 240% increase in net inflows in the first 2 months of the year compared to the same period of 2005.