Fitch Looks at Nine Months 2008 U.S. P/C Insurance Results;
Sharp Profit Decline Continues

Business Editors
Business Wire
November 19, 2008

CHICAGO--(BUSINESS WIRE)--November 19, 2008--The U.S. property/casualty insurance industry experienced a sharp decline in performance in the first nine months of 2008. Profitability fell due to poor investment results, above average catastrophe losses, and deteriorating accident-year underwriting income, which were partially offset by favorable prior years' loss reserve development.

Economic and financial market turmoil has adversely affected all financial services industry segments in 2008. Outside of a few notable companies, property/casualty insurers were modestly affected by problems in subprime mortgage and mortgage derivative markets, but recent events that promoted sharper declines in equity markets and a flight to the safety of treasury securities from high-rated corporate and tax-exempt bonds has had a more severe effect on insurers' invested assets and capital position.

In a new report, Fitch Ratings discusses aggregated GAAP earnings release and 10-Q filing data from a group of 52 publicly traded property/casualty insurers in the debt rating universe as well as several other insurance organizations of interest, to evaluate year to date 2008 performance.

During the first nine months of 2008, GAAP shareholders' equity declined for 46 of the 52 companies in the Fitch universe, largely due to realized and unrealized investment losses. In aggregate, the group reported a $55.7 billion (13%) decline in GAAP equity during the period (8.9% decline excluding American International Group, Inc. (AIG) results).

The group's net income, excluding AIG, dropped 77% in this period relative to the first nine months of 2007. Earnings are not expected to rebound significantly in the remainder of 2008, as further investment losses are likely. Fitch continues to expect most insurers in its publicly traded universe to post a calendar-year underwriting profit in 2008.

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