Prudential Gives P-C Insurers Downgrade

Prudential said in its report that it expects insurers' books of business to remain profitable for the next few years.

"We expect a period of stability before a return to destructive competition," the report said.

Among carriers, Prudential said it was downgrading St. Paul Travelers to "Neutral Weight" from "Overweight" because of shifts in the market. The firm also said it is concerned with an expected loss reserve charge between $250- and $500 million, which may be taken in the second or third quarter of this year. After completing the merger, Prudential said the company is re-examining its reserves and expects St. Paul Travelers to address any shortfall.

Areas of concern are from surety business, runoff operations?medical malpractice, reinsurance, Lloyd's and international, from the St. Paul operation. On the Travelers side, concerns focus on professional liability or surety. Asbestos reserves may also see a boost.

Prudential raised its rating on Safeco, saying it sees continued improvement in personal lines business. It also singled out Allstate.

"We favor the personal lines insurers over the commercial lines insurers and insurance brokers," the report continued.

Of the brokers, it said risk managers are satisfied with service and that few switched brokers.

When asked about the investigation of contingency fees by New York's Attorney General Eliot Spitzer, they said increased disclosure by the brokers would address any conflicts of interest.

The firm rated four brokers. Marsh & McLennan and Arthur J. Gallagher were rated "Neutral (Hold)." Aon was rated "Underweight (Sell);" and Willis was rated "Overweight (Buy)."