The better a property-casualty company's financial strength rating, the more it will benefit from the favorable operating conditions of 2005, according to a new study from Moody's Investors Services.
The favorable pricing of 2003 and 2004, along with a focus on underwriting discipline, has contributed to a significant rebound in profits and replenishment of capital strength, the report said.
Some commercial lines companies, however, were negatively impacted by adverse reserve development, either from business written during the soft market or from asbestos liabilities.
"Despite the favorable operating environment, lower-rated companies have not benefited to the same degree as higher-rated companies in crucial areas such as profitability and surplus growth," said Moody's associate analyst Enrico Leo.
The report said that 2005 top-10 ratios will remain relatively consistent despite the worst natural catastrophes in history. "Following Hurricanes Katrina, Wilma and Rita, Moody's expects prices for property lines to increase while terms and conditions will tighten," the report said.
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