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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