U.S. Reinsurer Results Improve
London Editor
London
A group of 30 U.S. property-casualty reinsurers reported a total combined ratio of 106.4 for the first quarter ending March 31, a substantial improvement over the 112.4 figure compiled by a similar group of companies for the same period last year, according to the Reinsurance Association of Americas quarterly survey of underwriting results.
During the first quarter, these companies wrote $6.7 billion of net premiums, up nearly 20 percent compared with $5.6 billion for the same period last year, the Washington-based RAA reported.
"There has been significant improvement across the industry, although a few companies are still experiencing unusually high loss ratios," said Donald Watson, director for Standard and Poor's Financial Services in New York. "The bulk of the improvement is from a reduction in loss expenses, which is directly related to premium increases."
The good news is that price increases are continuing but loss ratios in the first quarter are lower because there wasnt any significant catastrophe loss activity in the first quarter, he said.
However, he said, "we also would expect a number of companies to strengthen reserves yet again for business written in the 1997 through 2000 period," noting that this is usually a third- or fourth-quarter phenomenon. As a result, he said he didnt think the industry would hold to a 106 combined ratio for the year.
"I believe there is going to be further deterioration both from cat losses and reserve strengthening, throughout the rest of the year," he said.
What is positive is that there has been a turn in the market, although further price increases are still going to be required, he said.
He expects further rate strengthening during the July 1 renewal season, probably in the 5 percent range, which generates probably about 35-40 percent of the annual premium for the reinsurance industry.
"Weve seen some good increases in the accident and health and the marine lines. We still have minimal increases in the liability lines," he said.
He suggested that the industry will need to see some significant rate increases in the casualty area, particularly in workers compensation, before it will return to respectable results.
Of the big four U.S. reinsurers–American Re, Employers Re, General Re and Swiss Re–Mr. Watson noted that Swiss Re showed the least improvement during the first quarter with a 115 combined ratio.
"Swiss Re is still digesting its acquisition of Underwriters Re, so I think there is some distortion in the numbers," he said.
"The big story is that it looks like Gen Re has turned the corner [with a combined ratio of 104]," he said. Gen Res first quarter numbers suggest that "loss trends are finally moving in the right direction for them," he added.
American Re saw an improvement with a combined ratio of 108.3, "but not as much as we might like to see," according to Mr. Watson.
He said that the 103.2 combined ratio reported by Employers Re should be closer to 100 because the companys business mix has a lower loss ratio. "That being said, Employers Re is looking pretty good," he said.
An alphabetical selection of combined ratios for other RAA companies include:
Axa Corporate Solutions Reinsurance Company, 103.1.
Berkley Insurance Company, 105.6.
CNA Re, 107.6.
Enhance Reinsurance Company, 97.5.
Everest Reinsurance Company, 103.6.
Folksamerica Reinsurance Company, 118.3.
Gerling Global Reinsurance, 110.0.
Hartford Re Company, 109.5.
Odyssey America Re, 102.2. ("Odyssey Re has definitely turned the corner," Mr. Watson said, noting that the company is "coming out of a very difficult post-acquisition period.")
Overseas Partners U.S. Re Company, 134.6. (RAA said these results were negatively affected by the expense of startup activity. "The company was incorporated on Oct. 2, 2000 through the acquisition of all outstanding stock of Reliance Reinsurance Company," said the RAA.)
Partner Re U.S., 110.1. ("The U.S. operation [of Partner Re] is still trying to integrate the Winterthur and SAFR acquisitions and also coordinate with its Bermuda parent. Its a company in transition," Mr. Watson said.)
PMA Capital Insurance Company, 114.3. ("PMA Re is a disappointment because they have done so well for so long," Mr. Watson said. "The numbers for the first quarter indicate that they are still experiencing some difficulties in their primary markets, one of which is the workers comp.")
PXRE Reinsurance Company, 90.6. (Mr. Watson said PXRE has "an awesome number," which is to be expected because it writes a lot of property-catastrophe business, which produced few losses in the period.)
QBE Reinsurance Corp., 105.4.
SCOR U.S. Group/SCOR Reinsurance Company, 105.3. (Mr. Watson said SCORs number shows a definite improvement.)
Sorema North America Group, 115.6. (SCOR is planning to buy Sorema.)
St. Paul Re, 115.7.
Transatlantic Re Company/Putnam Re Company, 99.1.
Trenwick America Corp., 114.6.
Zurich Reinsurance (NA) Inc., 101.3.
The companies that showed decreases in net premiums written in the first quarter of 2001 were:
CNA Re, which reported net premiums written of $199.5 million during the first quarter of 2000, compared with $146.4 million in 2001.
Enhance Re had net premiums written of approximately $34 million for the first quarter last year, which dropped to $24.3 million for the first quarter this year.
PMA Capital decreased its net premiums written from $65.4 million last year to $50.2 million in the first quarter of 2001.
Swiss Re Americas net premiums written dropped from $424.7 million in the first quarter of 2000 to $287.3 million in the first quarter of 2001.
Zurich Res net premiums written dropped from $278.8 million last year to $222.8 million in the first quarter of 2001.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 11, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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