NU Online News Service, May 11, 11:45 a.m. EDT--The insurance industry should achieve profitability this year but is expected to slide back in 2006 as prices continue to soften, according to a Conning Research & Consulting Inc. report.

The Hartford, Conn.-based firm, a subsidiary of Swiss Re, released its "Property-Casualty Forecast & Analysis by Line of Insurance First Quarter 2005," noting that results "are better than we had been predicting the previous quarter."

Conning said that the preliminary results for 2004 indicate the industry earned its first underwriting profit in 25 years.

"Higher prices, tighter coverages and more effective deductibles helped to improve underwriting results," the report said.

Despite record losses in p-c business of $27.5 billion, the industry's combined ratio was below 100. Conning said a large percentage of the losses did not end up in industry year-end figures because of a combination of reinsurance for non-reporting companies, deductibles and the "effect of alternative markets" on the industry.

Conning predicts that the combined ratio will remain under 100 for 2005, if catastrophe losses are "normal"--a level between $13 billion and $14 billion. However, the onset of the soft market and deterioration in underwriting results will mean the ratio will be "near or above break-even" point in 2006.

Statutory surplus could improve to 9.5 percent in 2005 but slip to 8.3 percent in 2006, while return on equity is forecast to improve to 8.8 percent in 2005 and slip to 7.9 in 2006, Conning said.

As a whole, Conning foresees the trend for commercial lines will be continued softening prices with premium increases going into single digits.

In specific lines, personal lines auto will likely see favorable returns in 2006, along with positive results for homeowners and farm-owners lines. Commercial auto could climb upward, while workers' compensation combined ratio will climb in 2005 and 2006.

The line had a combined ratio in 2004 of 107.7, according to Conning.

Commercial multi-peril and commercial general liability will also not fare well through 2006, Conning said, with combined ratios well above 100.

Copies of the Conning study are available by calling (888) 707-1177, or through the company's Web site www.conningresearch.com.

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Connings 2006 Forecast Insurer Profits To Slide

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