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P/C Income Plummets

Posted on 21 Jan 09

Oldwick, N.J.-based A.M. Best, using its own data, said that during the first nine months of 2008, after-tax net income for the p-c industry fell to $7.3 billion as a result of the combination of deteriorating underwriting results and lower investment gains. This was compared to net income of $48.8 billion for the same period last year.

Best said soft market conditions and investment results conspired to bring the U.S. p-c industry’s after-tax return on equity (return on surplus—a measure of the industry’s overall after-tax profitability from underwriting and investment activity) to 1.4 percent for the nine-month period ending Sept. 30, down from 9.5 percent for the comparative period last year.

Best also reported:

  • Net premiums written fell 0.6 percent to $339.3 billion, driven by ongoing competition and soft market conditions in almost all lines of business and geographic areas.
  • As a result of challenging market conditions, including continued price softening, sizable and frequent weather-related losses, and the impact of significant losses reported by mortgage and financial guaranty insurers, the overall statutory combined ratio increased to 105.1 in the first nine months of 2008.
  • Excluding the impact of groups within Best’s mortgage and financial guaranty composites, the U.S. p-c industry posted an underwriting loss of $10.9 billion and recorded a combined ratio of 102.8 during the first nine months of 2008.
  • The U.S. p-c industry’s policyholder surplus declined $36.8 billion, or 7 percent, for the 12 months ended Sept. 30, 2008.
  • The personal lines segment’s underwriting results deteriorated significantly through third-quarter 2008 with a reported combined ratio of 104.9, compared to 95.7 through the same period of 2007.
  • The commercial lines segment’s combined ratio deteriorated 13.2 percentage points to 105.4 for the first nine months of 2008, driven in part by extensive underwriting losses for mortgage and financial guaranty insurers.
  • The U.S reinsurance segment’s combined ratio increased to 104.9 during the first nine months of 2008, up 10.3 points from 94.6 during the same period of 2007.
  • With three quarters down and one to go, the U.S. p-c industry is on pace to report its first year-end underwriting loss since 2005, breaking its two-year consecutive streak of recording an underwriting profit.