Investment Dips Impede Insurers' Recovery

NU Online Dec. 17, 3:27 p.m. EST? The first nine months of the year saw property-casualty insurers reverse a net loss for the period in 2001, but carriers' net worth was driven down by poor investment returns, two industry groups reported today.

The findings were reported by the Insurance Services Office, Inc. in Jersey City, N.J., and the National Association of Independent Insurers in Des Plaines, Ill.

Net income for the industry in the United States reached $9.3 billion after taxes through nine months, contrasting with a $2.6 billion net loss through nine months of 2001.

ISO and NAII said the industry's surplus, or net worth, fell 5.6 percent to $273.3 billion as of Sept. 30, from $289.6 billion at year-end 2001, as a result of capital losses on investments.

Net written premiums for the first nine months 2002 rose 13.6 percent versus year-ago levels to $279.8 billion. Catastrophe losses included in insurers' financial results declined to $3.9 billion through nine-months, from $16.3 billion through nine months 2001.

The report said that these positive developments were reflected by the industry's net loss on underwriting figure, which fell 51.4 percent to $18 billion for nine-months 2002 from $37.1 billion for nine-months 2001.

The combined ratio improved to 104.9 for the first nine months, 9.5 points better than the 114.4 for the same period last year.

The figures are consolidated estimates for the entire industry based on the reports of insurers that account for 96 percent of the U.S. property-casualty insurance business.

Industry net investment income--primarily dividends earned from stocks and interest on bonds--declined 5.4 percent to $26.4 billion in the first three-quarters of 2002 from $28 billion in the same period in 2001. Insurers realized $3.1 billion in capital gains on investments thus far in 2002, down 53.9 percent from $6.7 billion in the first nine months of last year.

Combining net investment income and realized capital gains, the industry's net investment gain through nine-months amounted to $29.5 billion, down 14.8 percent from $34.6 billion through the same period in 2001.

Annualized yield on cash and invested assets during the period fell 6.9 percent versus year-ago levels. "Low yields are apt to impede the growth of investment income going forward," said Don Griffin, NAII assistant vice president for business and personal lines.

For the third quarter, ISO and NAII said the industry net income was $4.8 billion compared with a loss of $5.3 billion for the period last year.

For details of the full report, see the National Underwriter's Dec. 30 print edition.

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Investment Dips Impede Insurers' Recovery

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