The financial health of Ireland's life insurance sector improved in 2003 as stock markets recovered. However, three of the nine largest companies saw their solvency cover fall.

The survey by actuarial and strategic consultants Life Strategies found that solvency cover - the ratio of available assets to the required minimum solvency margin - rose by 5 per cent to 226 per cent from 215 per cent a year earlier. The 2002 figure marked a sharp reversal in solvency cover from the 272 per cent figure in 2001 as stock markets tumbled.

"Whilst life companies still have some way to go before they return to the solvency cover levels of end-2001, the overall financial position of the sector is quite healthy with aggregate solvency cover of more than twice that required," said Mr Jim Murphy, director of Life Strategies.

Within the sector, however, there was a significant difference between the best and worst performers. The highest solvency cover among the nine groups surveyed was 451 per cent, up from 339 per cent in 2002.

At the other end of the scale, one life company had solvency cover of just 133 per cent. Last year, the lowest cover level was 137 per cent and the trend in recent years has been that companies at the bottom of the range are moving closer to the minimum solvency cover required.

Three of the nine companies surveyed saw their solvency cover fall last year despite the impact of a sharp rise in stock markets.

However, Life Strategies points out that Irish companies have not availed of measures adopted by rivals in the UK to boost their solvency margins.

The figures are drawn from returns made by the companies to the Irish Financial Services Regulatory Authority. The companies covered by the survey were: Acorn Life, Anglo Irish Assurance, Ark Life, Bank of Ireland Life, Canada Life, Eagle Star, Friends First, Hibernian Life and Pensions and Irish Life.

However, it is not clear which companies are outperforming and which are underperforming as the data are only released on a confidential basis.

Between them, the nine companies surveyed had total assets under management of €40.39 billion at the end of last year, up 20 per cent on the previous year.

Premium income was split evenly between the life and pensions sides of the business, according to the study with regular premium income for both categories rising in contrast to single premium income.

Premium income for the nine companies, which represent "the vast bulk of the domestic life assurance market", according to the authors, rose 0.4 per cent to €7 billion, while expenses fell 2 per cent.