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RAA: Losses Drag Down U.S. Reinsurers Profitability in 2011

Source: A.M. Best

Posted on 20 Mar 2012

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U.S. reinsurers saw their profitability decline in 2011 due to an uptick in losses, according to a survey of 19 property/casualty reinsurers by the Reinsurance Association of America.

The group of 19 companies posted a year-end 2011 combined ratio of 107.2 up from 95.4 for year-end 2010, according to the survey. While the expense ratio for the group improved to 30.2 for 2011 from 31.3 for the prior year, the loss ratio widened to 77 from 64.2.

The group of companies saw a 13% increase in net written premiums, which rose to $26.4 billion.
Of the 19 companies surveyed, the following six posted an underwriting gain for the year: Axis Reinsurance Co., General Re Group, Munich Re America Corp., Sirius American Insurance Co., Swiss Reinsurance America Corp., and the Toa Reinsurance Company of America.

But all 19 companies posted positive investment income, totaling $8.3 billion, up 28% from $6.5 billion at year-end 2010. Berkshire Hathaway's National Indemnity alone was responsible for $5.5 billion in investment income in 2011, up from 61% from $3.4 billion in 2010.

Including investment income, 12 of the 19 companies posted a positive net income at year-end 2011. In addition to the six companies with a positive underwriting gain, those companies were: Berkley Insurance Co., National Indemnity Co., Partner Reinsurance Co., Platinum Underwriters Reinsurance Inc., Scor U.S. Group/Scor Re, and XL Reinsurance American Inc.

But as a whole, the group's total net income fell 36% to $6.7 billion in 2011 from $9.1 billion in 2010.

2011 has been called "The Year of the Cat," according to a briefing by A.M Best Co.

Until 2011, tornadoes typically were not considered one of the larger risks for the insurance industry in total, according to A.M. Best Co. But tornadoes were the costliest type of U.S. natural disaster in 2011, Munich Re said. It had been rare for a series of tornadoes to inflict more than $1 billion in losses, but according to Swiss Re, insured losses for tornado and hail damage in the United States reached $14 billion in 2011.

The top five global reinsurers by 2010 gross written premiums were Munich Reinsurance Co., Swiss Reinsurance Co., Hannover Rueckversicherung, Berkshire Hathaway, and Lloyd's according to BestLink.