U.S. Re Rates, Losses Up

London Editor

Years of under-priced business, worsening loss development, andevents such as Tropical Storm Allison continue to wreak havoc onthe balance sheets of U.S. reinsurers–30 of which reported a totalcombined ratio of 115.6 for the six-month period ended June 30, upfrom 112.2 for the first half of last year, according to theReinsurance Association of America.

RAAs quarterly survey of underwriting results found that thecombined ratio for the first half of 2001 includes a loss ratio of85.7 and an expense ratio of 29.9, compared with 80.9 and 31.3,respectively, in 2000.

“The underwriting results indicate that the premium increasesseen in 2000 and year-to-date, which have been significantacross-the-board, are not yet sufficient to bring this industryback into profitability,” said Don Watson, director of insuranceratings for Standard & Poors in New York. For some companies,Tropical Storm Allison affected results during the second quarter,while many are being impacted by under-pricing between 1997 and2000, he said.

During the first six months of 2001, the 30 RAA companies wrote$13.5 billion of net reinsurance premiums, up about 9 percentcompared with $12.3 billion for the same period last year.

However, net income for the first six months of 2001 came toapproximately $485 million, down from $549 million for the sameperiod last year, the RAA said. A big culprit is net realizedcapital gains, with the 30 RAA companies reporting a total of $281million for the first half of 2001, down about 17.5 percent from$341 million for the first half of 2000.

Mr. Watson said he expects premium growth for the full year ofslightly more than 15 percent for the U.S. reinsurance industry,which will be almost entirely derived from rate increases.

The actual rate increases are probably averaging in excess of 20percent, but premium volume is not growing by that much becausesome companies are “falling off of some treaties,” he said.

He predicted that the combined ratio would improve by the end ofthe year, but not by much. Depending on catastrophe losses for therest of the year, its unlikely that the U.S. industry will break110, he said. “I think it will be better than the 115 reportedhere, but my guess is that it will be around 112,” he added.

He noted that two companies of the big four in the U.S. marketare showing reasonable results. American Re has a combined ratiofor the half of 107.2, while Employers Re has a combined ratio of108.6.

However, the two largest companies–General Re and Swiss Re–are“producing results that are at the bottom of the industry,” headded. “Until the lead players exercise underwriting discipline,this market cant effectively turn around.” General Res combinedratio is at 119.4, while Swiss Res is at 127.1.

An alphabetical selection of combined ratios for RAA companiesinclude:

American Re-Insurance Company, with a combinedratio of 107.2 for the first six months of 2001, compared with116.9 for the same period last year.

Axa Corporate Solutions Reinsurance Company,110.5 for the first half of 2001, compared with 110.6 forfirst-half 2000.

Berkley Insurance Company, 106.4 for the firstsix months, compared with 103.6 last year (when it was calledSignet Star Reinsurance Company).

CNA Re, with a combined ratio of 300.5,compared with 109.0 last year. (For comparison purposes with lastyear, CNA Res figures include non-U.S. affiliates. In a footnote,the RAA survey explains that CNA Res high combined ratio for thesecond quarter relates to “continued emergence of adverse lossexperience across several lines of business, prompting the companyto significantly strengthen its loss reserves.” The footnote wenton to say that the reserve strengthening relates mainly to accidentyears 1997-2000.

Employers Reinsurance Corp., with a combinedratio of 108.6, compared with 113.0 last year.

Everest Reinsurance Company at 104.9, comparedwith 104.2 last year.

Folksamerica Reinsurance Company at 111.0,compared with 109.5 last year.

General Re Group at 119.4, compared with 112.3last year.

Gerling Global Reinsurance at 116.5, comparedwith 113.0 last year.

Hartford Re Company at 113.2, compared with104.9 last year.

Odyssey America Reinsurance Corp. at 101.5,compared with 107.8 last year.

Overseas Partners US Reinsurance Company at108.0. (A comparison with last year cannot be made because thecompany is new.)

Partner Re U.S. at 108.4, compared with 113.9last year.

PMA Capital Insurance Company at 113.8,compared with 101.0 last year.

PXRE Reinsurance Company at 103.5, comparedwith 187.1 last year.

QBE Reinsurance Corp. (formerly Sydney Re) at106.8, compared with 106.3 last year.

SCOR U.S. Group/SCOR Reinsurance Company at107.9, compared with 143.0 last year.

Sorema North America Group at 128.9, comparedwith 120.7 last year. (SCOR has completed its purchase ofSorema.)

St. Paul Re at 104.9, compared with 118.5 lastyear. (St. Pauls combined ratio includes U.S. and non-U.S.affiliates for purposes of comparison. The companys U.S. statutoryresults exclusively would come to a combined ratio of 115.0 for thefirst six months of 2001.)

Swiss Reinsurance America Corp. at 127.1,compared with 115.5 last year.

Transatlantic Re Company/Putnam Re Company at101.5, compared with 101.1 last year.

Trenwick America Corp. at 130.8, compared with113.1.

Zurich Reinsurance (North America) Inc. at102.2, compared with 102.3.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, September 10,2001. Copyright 2001 by The National Underwriter Company in theserial publication. All rights reserved.Copyright in this articleas an independent work may be held by the author.

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