A. M. Best Co. said 2008 upgrades in ratings barely outpaced downgrades for property-casualty sector insurance companies.

The Oldwick, N.J.-based rating firm said that after a strong positive trend in 2006 and 2007 natural catastrophes and financial upheaval had driven "a sharp reversal in the property-casualty industry's fortunes."

o Net income was down and the combined ratio was up for 2008, as investment losses took a toll, a soft market cut premium income, and natural catastrophes drove up underwriting losses.

o Downgrades of property-casualty insurers totaled 57 in 2008, up from 43 in 2007 but still down sharply from 97 in 2004.

o Upgrades totaled 59, returning to levels seen in 2004 and 2005 after a sharp spike to 128 in 2006 and 87 in 2007.

o Upgrades in commercial lines outpaced downgrades 33-32, while personal lines insurers saw 25 upgrades and 24 downgrades. Reinsurers saw one upgrade and one downgrade.

o Rating changes in 2008 were down to 20 percent of all rating actions from about 25 percent over the preceding four years. Total rating actions dropped from prior years to 1,580 in 2008.

o Companies that were upgraded exhibited pricing discipline, a history of strong operating results, and liquidity and capitalization consistent with their rating level despite investment losses.

o Downgrades may reflect adverse reserve development, shortfalls in profitability, imprudent growth, or capitalization dropping below that needed to maintain a company's rating level.

Special Reports /

A.M. Best Says 2008 Saw Slightly More P-C Upgrades

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