NU Online News Service, May 11, 2:14 p.m. EDT

Insurers are less inclined to use prior-year reserves to mask losses, according to a financial analyst's latest report.

Stifel Nicolaus' Meyer Shields says in a review of 52 publicly held insurance companies that aggregate quarterly loss reserve releases declined 17 percent from the same period last year. The report follows the analyst's fourth quarter observation that 2011 fourth-quarter loss-reserve development declined by 12 percent in 2011 over 2010.

For 2012's first quarter, net releases fell to $1.5 billion compared to $1.8 billion in 2011, Shields says.

While the number may not be significant, Shields says seven insurers accounted for 60 percent of the total reserve releases while only contributing 34 percent to the group's net earned premium.

The insurers are:

ACE
Allstate
Chubb
Cincinnati Financial Corp.
Markel
ProAssurance
Travelers

Close to 63 percent of the companies in the survey reported lower year-over-year reserve releases and 19 percent reported net unfavorable loss development.

Additionally, most insurers indicated they had implemented rate increases, but Shields says the reported hikes are not enough to match or exceed current claim-cost inflation.

He adds that with a remote chance of interest-rate increases to help insurers' investment portfolios, more rate increases are expected, and insurers will likely walk away from business deemed unprofitable.

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