Claims News Service, Dec. 17, 10:52 a.m. EST -- A profitability report on the P/C industry's first nine months of 2008 offered a little bit of sugar -- and a whole lot of medicine.

The good news is that, despite significant deterioration in underwriting and investment results, the P/C industry achieved a profit of $4.1 billion through Jan.-Sept. 2008. The bad news? A year-to-year comparison for the same time period shows that this figure is almost 92 percent less than what the industry realized in 2007, when it hit a high mark of $50 billion in net income.

Worse still, the industry is expecting $9.9 billion in net losses for 2008's third quarter -- a $26.7 billion adverse swing from the industry's $16.9 billion in net income after taxes in third-quarter 2007, ISO said. The company released the report in conjunction with the Insurance Information Institute and the Property Casualty Insurers Association of America (PCI).

Through the first nine months of 2008, ISO said that insurers suffered $19.9 billion in net losses on underwriting -- a $38.2 billion adverse swing from insurers' $18.4 billion in net gains on underwriting through nine-months 2007. The combined ratio -- a key measure of losses and other underwriting expenses per dollar of premium -- worsened to 105.6 percent in the first nine months of this year from 93.8 percent in the first nine months of 2007.

Insurers' net investment gains -- the sum of net investment income and realized capital gains (or losses) on investments -- fell 40.7 percent to $28.3 billion for nine-months 2008 from $47.8 billion for nine-months 2007.

ISO said that the figures are consolidated estimates for all private property/casualty insurers based on reports accounting for at least 96 percent of all business written by private U.S. property/casualty insurers.

Overall net loss and loss adjustment expenses (after reinsurance recoveries) jumped $39.7 billion, or 18.1 percent, to $258.8 billion. ISO estimates that the net catastrophe losses included in insurers' financial results increased to $21.6 billion in nine-months 2008 from $5 billion in nine-months 2007. Excluding estimated net catastrophe losses, loss and loss adjustment expenses increased $23.1 billion, or 10.8 percent, to $237.2 billion for nine-months 2008 from $214.1 billion for nine-months 2007.

According to ISO's Property Claim Services (PCS) unit, catastrophes occurring in the first nine months of 2008 caused $24.9 billion in direct insured losses to property (before reinsurance recoveries) -- more than five times the $4.8 billion in direct insured losses to property due to the catastrophes occurring in the first nine months of 2007 and more than twice the $12.3 billion average for nine-month catastrophe losses during the past 20 years.

"That insurers remained profitable through nine-months 2008 despite multiple challenges is both a testament to their risk management and a sign that the P/C insurance industry remains well able to fulfill its obligations to policyholders," said David Sampson, PCI's president and CEO. "Unlike the once iconic Wall Street institutions and banks brought down by the financial crisis, property/casualty insurers' conservative investment practices and modest financial leverage have thus far assured that insurers have ample resources to pay claims."

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P/C Industry Still Profitable Despite Recent Losses

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