Standard & Poor's Corp. rated more property and casualty insurers vulnerable to insolvency in its latest annual report.

A total of 338 P/C companies were classified as financially vulnerable in S&P's annual ratings report, released late last month. A year ago, 254 insurers received that S&P rating, and 16 of these have actually failed since then, mostly at the hands of Hurricane Andrew, an S&P official said.The insurers in question are mostly small, regional companies with less than $10 million in claims-paying surplus, and represent only 3 percent of the P/C industry's premium volume.

Large P/C insurers whose ratings were lowered this year included Cigna Corp. Last August, S&P lowered its claims-paying ability rating on Cigna's pooled P& C operations to "BBB+" from "A."

S&P no longer rates Cigna's inter-company pool.

On Tuesday, competing rating agency A.M. Best Co., Oldwick, N.J., put its own "A-" pooled rating for Cigna under review pending further evaluation of the company's exposure to environmental and asbestos claims. Cigna said it would take a $375 million pretax charge to add to its environmental reserves and another $150 million pretax charge to restructure P/C headquarters and field operations.

Of all the companies S&P reviewed, the largest share - 643 - received ''BBB" or "BBBq" ratings, reflecting "adequate" financials.

S&P's "qualified" ratings are based on public information. No insurers paying for the review - and publishing the results - were rated with ''questionable" financial strength. The 'B' rating is the poorest rating S&P assigns to insurers who pay for the service.

S&P rated a total 1,887 companies. Of these, 414 insurers, subsidiaries and their affiliates pay S&P a fee of $25,000 to $32,000 to conduct in-house audits of their finances.

S&P's findings come when analysts who follow the industry say that overall the financial health of P/C insurers is improving. "In general, the P/C industry has had some good news. The catastrophes have been a lot less this year than last year," said Sean Mooney, senior vice president of Insurance Information Institute in New York.

Larger P/C insurers with more than $50 million in surplus were better able to capitalize on capital gains made from sales of stocks, bonds and real estate holdings, said Mr. Mooney. P/C insurers saw realized capital gains improve to $4.7 billion in the first half of the year from $3.1 billion a year earlier, according to the industry-supported Insurance Information Institute.

Those gains contributed to the $9.2 billion in net income that U.S. P/C insurers earned during the first six months of the year. That was an improvement from $7.7 billion in net income earned in 1992.

Smaller companies that are continuing to fund 1992 catastrophe losses and contribute to their reserves were restricted in their use of capital, Mr. Mooney said. These companies also are hit hard by competition that has made it difficult for them to properly price their business, he said.

Last year, catastrophes cost the industry an estimated $23 billion in insured property damage. So far this year, catastrophes have caused $4.9 billion in insured damages. The latest estimate excludes fire damages stemming

from a series of fires in Southern California beginning Oct. 27.

The vulnerable P/C companies have been slow to refocus their operations to rally from last year's catastrophe losses, said Steve Dreyer, director of S&P Insurer Solvency Review report. Life and health insurers who've shed their junk bond and real estate holdings to meet new solvency standards to be implemented next March have fared better, he said.

This year, S&P named 157 L/H companies financially vulnerable, down from 208 companies deemed so last year. The companies were declared vulnerable out of 1,144 L/H companies nationwide.


According to Standard & Poor's, a string of costly catastrophes in recent years has weakened some small property / casualty insurers. Conversely, many life / health companies have rebounded from their poor real estate and security investments.

Vulnerable Property / Casualty Companies

1992 254

1993 338

Vulnerable Life / Health Companies

1992 206

1993 157