Insurers Post Worst Underwriting Results Since 2001 (Update1)
By Andrew Frye
December 16, 2008
Dec. 16 (Bloomberg) -- U.S. property and casualty insurers posted their worst underwriting results since 2001 as hurricanes led to higher claims after companies cut prices to win business in a weakening economy.
Carriers had $19.9 billion in net losses from underwriting in the first nine months of the year, compared with $18.4 billion net gains in 2007, according to Insurance Services Office Inc., the Jersey City, New Jersey-based supplier of actuarial data.
Insurers were hurt by record tornado activity in the second quarter and costliest hurricane season since 2005 as Ike and Gustav slammed into the Gulf Coast in September. Industry executives said price competition intensified after American International Group Inc., the largest commercial insurer, was rescued by the government in September and took steps to retain customers.
Insurers' results through the first nine months "fell victim to a perfect storm," Michael Murray, assistant vice president at the ISO, said in the statement. "The downturn in the economy, the crisis roiling the financial system, softening in insurance markets, and weather-related catastrophe losses combined to take a toll on underwriting and investment results,"
Losses on investments, which aren't counted in the underwriting number, nearly drove New York-based AIG to bankruptcy and contributed to stock declines at property insurers including Allstate Corp.
Insurers spent $1.06 in claims and expenses for every dollar of premium revenue, the worst margin since 2001 when the Sept. 11 attacks contributed to costs of $1.14 in the nine-month period.
The seven-company Standard & Poor's 500 Property & Casualty Insurance Index dropped 36 percent this year.
Click here to return to FBIC homepage