The U.S. reinsurance sector saw its net income and combined ratio for the 2005 first quarter virtually unchanged, while the net written premiums dropped more than 10 percent, according to the Reinsurance Association of America.
The Washington, D.C.-based RAA reported that 26 major U.S. property-casualty reinsurers in aggregate had 93.9 percent combined ratio for the first quarter, down 0.1 point from 94.0 percent reported by a similar group of reinsurers one year ago. The RAA result was based on a survey of reinsurers' statutory underwriting figures.
The 93.9 percent combined ratio reported this past quarter by the 26 U.S. reinsurers reflects a 68.2 percent loss ratio and a 25.7 percent expense ratio.
The reinsurers saw a little change in aggregate net income, which was $1.44 billion for the 2005 first quarter, up 1 percent from $1.42 billion last year. The net written premiums, meanwhile, fell 10.3 percent to $7.01 billion from $7.82 billion.
According to the survey, the aggregate policyholder surplus was $61.68 billion, up 9.7 percent from $56.21 billion a year ago.
"This first-quarter combined ratio looks pretty strong but there is also seasonal aspect involved here," Fitch Ratings analyst Mark Rouck commented. "Obviously the main hurricane season hasn't happened yet, and as to the extent companies do reserve studies, that tends to happen in the fourth quarter," Mr. Rouck said. He also observed that U.S.-based reinsurers' combined ratios continue to lag behind those in other marketplaces such as Bermuda. "When you look at the broader spectrum of reinsurers including the Bermuda-domiciled companies, combined ratios in aggregate have been better than what the RAA ratios have been for U.S.-based reinsurers," Mr. Rouck said.
Commenting on falling net written premiums, Mr. Rouck said there are two main factors driving this decline. "First, there are just some pressures on rates overall. Our view is that the rates have been under pressure for some time now and that's starting to impact these results," he said.
Second, since the RAA data comes from a small universe of U.S. companies, it tends to be driven by a few large U.S.-based reinsurers, some of which have been pruning their books of business.
"When you look at GE Insurance Solutions, its numbers dropped off by almost 25 percent year-over-year," Mr. Rouck said. GE Insurance Solutions' net written premiums for the 2005 first quarter were $615 million, down from $800 million a year ago. National Indemnity's net written premiums were also down significantly, down to $928 million from $1.288 billion, while General Re Group saw its net written premiums fall to $505 million from $723 million.
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