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Fitch: P/C Profits Fall as Cat Claims, Investment Losses Outweigh Underwriting Gains

Source: Fitch

Posted on 23 Mar 2009

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According to a report released on Thursday from Fitch Ratings, the net profitability of U.S. property/casualty insurers significantly fell in 2008 as investment losses surpassed a small underwriting profit.

Fitch evaluates full year 2008 industry performance based on a compilation of GAAP earnings release and 10-K filing data from 49 property/casualty insurance organizations. Compared with 2007, many insurers in 2008 showed flat or reduced premiums in many cases, poorer underwriting results due to weaker pricing and significantly higher catastrophe-related losses, particularly due to Hurricane Ike. Nonetheless, the large majority of insurers in the group reported an underwriting profit for the year.

Operating profits for the group, declined considerably for the year. However, a number of market participants reported reasonable operating returns on capital. When investment losses are considered, a larger percentage of insurers reported unfavorable returns or net losses, as well as declines in GAAP shareholders' equity for the full year.

Insurers' investment income is unlikely to improve in 2009 and underwriting results likely will deteriorate further this year because pricing has not yet hardened despite the 2008 losses, the agency said.