2008-07-14 23:54:09 -

www.ambest.com - Dislocation in the capital markets and rising investment risk continue to place stress on the balance sheets of publicly traded life and annuity companies. Despite a challenging first quarter, A.M. Best Co. does not expect industry-wide distress.

-- Comparing the change in accumulated other comprehensive income (AOCI) of year-end 2007 to first quarter 2008,

there was a 5.7% overall decrease in adjusted shareholders' equity for this report's group of companies.

-- Increased investment impairments and equity-market volatility were the primary drivers of the first quarter, year-over-year net operating income decline of 8% (on average).

-- Emerging risks related to commercial mortgages and rising corporate bond default rates create the potential for additional stress on the industry's capital strength.

-- Current investment yields remain challenged despite a significant widening of corporate bond spreads and a corresponding offset in the 10-year Treasury rate.

-- Continued equity market volatility and declines in subprime and Alt-A loan values are likely to further stress second quarter results. However, with a few exceptions, life insurers' overall exposure to subprime and Alt-A mortgages remains moderate and appears manageable.

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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:
Rosemarie Mirabella, 908-439-2200, ext. 5892
rosemarie.mirabella@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