A.M. Best Special Report: Life Insurers Saw Modest Boost in 2007 Liquidity, Model...

A.M. Best Special Report: Life Insurers Saw Modest Boost in 2007 Liquidity, Model Shows

OLDWICK, N.J.--(Business Wire)--
U.S. life insurers' liquidity improved slightly in 2007, based on
results from A.M. Best Co.'s Liquidity Model (AMBLM). For 2007, the
average short ratio was 215%, up from 213%, and the average long ratio
was 161%, up from 160%. The slight increase continues a trend A.M.
Best has noted since 2005.

-- A.M. Best's analysis focuses on companies with a majority of
interest-sensitive liabilities such as fixed annuities.

-- U.S. life insurers continue to increase investments in fairly
liquid assets, offsetting increases A.M. Best has noted in less liquid
assets such as commercial mortgages since 2005.

-- Investments in mortgage-backed assets (commercial and
residential) were relatively stable from 2005 to 2007.

-- Aggregate general account annuity reserves declined from 2005
to 2007, due mainly to the low interest rate environment.

-- The combination of fairly liquid investments, declining
liabilities and greater portions of surrender-protected business
helped to improve liquidity ratios from 2005 to 2007.

-- A.M. Best expects the liability patterns to continue and
believes U.S. life insurers continue to maintain sufficient liquidity.

-- Events in 2008 will continue to test the industry's balance
sheet strength as the subprime crisis worsens by pressuring valuations
on mortgage-backed securities.

-- Severe pressure on the auction-rate securities market has
rendered these instruments illiquid.

-- A.M. Best will continue to closely monitor market conditions
impacting various asset and liability characteristics, as well as
revisions in accounting practices that may have an impact on AMBLM.

BestWeek subscribers can download a PDF copy of all full special
reports or a combination of the report and all related spreadsheet
files of the report data at no charge at www.bestweek.com.

Nonsubscribers can visit www.bestweek.com for pricing information
or call customer service for more information at (908) 439-2200, ext.
5742.

Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals
and health care system providers. For more information, visit
www.ambest.com.

A.M. Best Co.
Analysts
George Hansen, 908-439-2200, ext. 5469
george.hansen@ambest.com
or
Andrew Edelsberg, 908-439-2200, ext. 5182
andrew.edelsberg@ambest.com
or
Public Relations
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com

Copyright Business Wire 2008