One hundred thirty companies, comprising 85% of life insurance industry assets, posted a record high composite Risk-Based Capital ratio of 278% in 2000, despite a reduction in surplus for 53 of the 130 companies.
The Townsend & Schupp Company's LIBRA (Life Insurance Business Risk Analysis) Annual Review shows that the ratio of Total Adjusted Capital to Company Action Level Required Capital exceeded 270% for the fourth consecutive year.
At least 120 of the 130 companies exceeded a 200% RBC ratio, for the fifth consecutive year. Ninety-three companies (72%) had an RBC ratio exceeding 250%, and 49 companies (38%) exceeded a 300% RBC ratio.
Table 1 shows the actions imposed on companies that have less capital than required by the National Association of Insurance Commissioners' Risk-Based Capital formula. As the RBC ratio falls, the corrective actions grow tougher.
None of the 130 companies in the T&S Industry Composite were subject to possible regulatory action at year-ends 1997-2000 (i.e., their RBC ratios all exceeded 125%).
Table 2 shows RBC ratios, and their distribution, for 130 major U.S. life insurers for 1993-2000. RBC ratios were first published in 1993. Five of the eight companies with RBC ratios under 200% in 2000 are health insurers.
The lowest RBC ratios in 2000 are 149% for LifeUSA, which had 30% growth in assets combined with capital losses, and 163% for LINA, which paid shareholder dividends equal to 17% of its prior-year surplus.
Of the current 130 largest companies, 16 to 18 companies exceeded a 400% RBC ratio in 1997-2000, and 29 to 31 companies fell between 300-399% in 1998-2000.
