I.I.I.: PC Premiums To Increase 2.7%

NU Online News Service, Feb. 2, 10:34 a.m. EST?Property-casualty insurers' premiums on average should increase 2.7 percent this year, down from 4.3 percent in 2004, according to the Insurance Information Institute Groundhog Forecast released today.[@@]

I.I.I.'s prediction for the sector's combined ratio on average was 98.9, a slight deterioration from last year's level of 98.7. The forecast is the work of a panel of stock analysts and industry professionals.

Robert P. Hartwig, senior vice president and chief economist at the institute, wrote that the premium growth figure represents more than a halving of the 9.8 percent increase in 2003.

Premium growth in 2004, he noted, came in well below the most pessimistic analyst expectations?the consensus was for 7.4 percent growth, with the lowest individual estimate at 5.2 percent.

Mr. Hartwig said sharp weakening in the pricing environment over the past year "means that current gains are more directly related to increased exposure growth and higher demand associated with the current economic recovery."

According to I.I.I., the combined ratio figure?a ratio of losses and expenses to premiums?for this year means that the industry will still be paying out almost exactly the same amount in claims and associated expenses as it earns in premiums?increasing the importance of investment earnings."

The big risk for the industry, I.I.I. said, is that pricing and underwriting discipline may decline. While prices have softened, they "cannot yet be characterized as destructive."

Other factors noted in the mix as risky to the industry include class action litigation; the Terrorism Risk Insurance Act, which remains to be extended; and the unknown "ultimate impact" of the investigations of insurers by New York Attorney General Eliot Spitzer and other states' agencies.

Groundhog Forecast 2005

NET WRITTEN PREMIUMS

(% Change from Prior Year)

EST.

FORECAST*

2004

2005

COMPANY

Lehman Brothers

4.3%

4.0%

Merrill Lynch

Firemark Investments

Goldman Sachs

Conning

Raymond James

4.3

4.3

4.0

5.3

4.2

4.0

3.5

3.5

3.1

3.1

Gill & Roeser

4.7

3.0

Prudential Securities

Morgan Stanley

A.G. Edwards

Tillinghast Towers-Perrin

ISO

Standard & Poor's

Average

4.1

4.0

4.0

5.0

4.1

4.0

4.3

2.9

2.6

2.0

2.0

1.1

0.9

2.7

COMBINED RATIO

(After Dividends)

EST.

FORECAST*

2004
2005

COMPANY

Gill & Roeser

100.0

101.5

Tillinghast Towers-Perrin

Standard & Poor's

102.0

98.0

101.4

100.5

A.G. Edwards

99.0

100.0

Conning

99.8

99.0

ISO

97.5

99.0

Lehman Brothers

99.0

98.7

Merrill Lynch

Firemark Investments

Morgan Stanley

Goldman Sachs

Raymond James

Prudential Securities

97.5

98.0

97.5

97.7

98.9

97.8

98.5

98.0

97.8

97.7

97.5

96.1

Average

98.7

98.9

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