Auto Insurers’ 3Q Earnings Hit by Investments, Cats and Prior-Year Losses

NU Online News Service, Nov. 3, 2:13 p.m. EST

Auto insurers Mercury General Corp., Infinity Property and Casualty Corp. and Safety Insurance Group Inc. each report drops in third-quarter income, with Los Angeles-based Mercury General posting a $3.8 million loss.

Mercury General says it earned $96.8 million during the 2010 third quarter but was hurt this year by net-realized investment losses of $43.5 million, compared to a gain of $56.2 million a year ago.

Mercury General says Hurricane Irene caused $4 million in pre-tax losses during the quarter. The company’s 98.3 third-quarter combined ratio was affected by unfavorable development of $11 million due to re-estimates of California bodily-injury claims.

Infinity says third-quarter net income dropped 80.1 percent to $6.1 million, also due to unfavorable development on prior accident year losses and loss-adjustment expenses reserves of $4.8 million.

The unfavorable development is primarily caused by accident year 2010 from increases in severity on personal-injury protection in Florida and bodily injury in California, Birmingham, Ala.-based Infinity says.

The third-quarter combined ratio was 99.3 compared to 88.4 last year and underwriting income fell 93.5 percent to $1.7 million.

Massachusetts auto writer Safety reports a 42.9 percent drop in third-quarter net income to $8.8 million from $15.4 million a year ago during the same period.

Catastrophe claims hurt earnings as a $23.1 million increase in loss and loss-adjustment expenses to $111.5 million during the quarter was caused by a wind and hail storm and Hurricane Irene—which was downgraded to a tropical storm when it hit Massachusetts.

Catastrophe losses of $23.7 million were largely to blame for United Fire & Casualty Co. reporting a $6.7 million third-quarter loss compared to a profit of $890,000 million a year ago during the third quarter.

The Cedar Rapids, Iowa-based property and casualty insurer says it was hurt by a straight-line wind storm in its home state, which caused $5 million in losses. Another $4.6 million in losses was generated by a wind a hail event affecting Iowa, South Dakota, Nebraska and Missouri.

Catastrophe losses this year have been $71 million, adds United Fire.

Also this week, international specialty insurer HCC Insurance Holdings says net income for the quarter was down 35 percent to $60.4 million.

Catastrophe losses at the Houston-based company were $34.6 million, which added 6.2 points to its combined ratio for the third quarter of 92.8 compared to 82.2 last year during the same period.

Results included $88 million in net favorable development primarily in U.S. and international directors’ and officers’ lines of business, offset by $87.4 million in adverse development in professional liability in the United Kingdom, says HCC.

Meadowbrook Insurance Group Inc. reports third-quarter net operating income of $9.5 million compared to $14.6 million. Net income was about $9.8 million from about $15 million a year ago.

Storm losses for the Southfield, Mich.-based company were 43.7 million after tax, which added 2.9 points to its combined ratio of 100.

ProAssurance Corp., a medical professional liability insurance provider, reports net income of $43.7 million for the third quarter compared to $51 million a year ago.

Net premiums written increased to $164.8 million from about $150 million last year but the Birmingham, Ala.-based insurer took a net realized loss on investments of nearly $12 million.

Bermuda-based American Safety Insurance Holdings says third-quarter net earnings were $5.8 million compared to $7.2 million for the 2010 third quarter.

American Safety says a worsening of its third-quarter combined ratio to 101.3 from 98.3 last year was a bigger loss ratio caused by market conditions, not Hurricane Irene losses. Plus, technology investments and lower fee income increased the company’s expense ratio. 

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