Reinsurance Posts ?04 Underwriting Loss
NU Online News Service, March 8, 4:17 p.m. EST?Declining net written premiums and poorer combined ratio numbers highlighted 2004 results for the reinsurance industry, according to figures confirmed by the Reinsurance Association of America.[@@]
Prudential Financial property-casualty analyst Jay Gelb in a note to investors said that 2004 net written premiums decreased 6 percent to $29 billion.
"We suspect the decline was influenced partly by falling pricing stemming from increased competition and flat demand," Mr. Gelb wrote. "As insurers become more profitable, they are willing to retain more risk."
Mr. Gelb quoted figures from an RAA annual report that the organization plans on officially releasing March 17. But RAA spokesperson Scott Williamson confirmed the figures as correct.
The 2004 combined ratio rose to 106.2 percent, up from 101.2 percent in 2003. Mr. Gelb wrote that the Big 4 reinsurers?American Re, General Re, Swiss Re and Employers Re?all failed to generate a combined ratio below 100 percent.
"Barring the unusually high catastrophe losses in 2004, we suspect that the reinsurance industry could have earned an underwriting profit," Mr. Gelb wrote.
Policyholders' surplus increased by 9.5 percent to $61 billion in 2004 from $56 billion in the previous year.
"Notably, a continued rising surplus could lead to increased competition and market softening in 2005," Mr. Gelb wrote.
Net income, however, increased 2 percent to $3.1 billion in 2004 from $3 billion in 2003. The rise was driven by $4.8 billion in investment income, which is down 15 percent from 2003's $5.6 billion, Mr. Gelb wrote.
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