After reporting its first underwriting profit in decades in 2004, the property-casualty industry 2005 combined ratio climbed just above breakeven, according to data published yesterday.
Initial, unconsolidated regulatory filings published online in Highline Data's Insurance Analyst PRO database put the net industry combined ratio for 2005 at nearly 101, compared to 98 in 2004 and just over 100 in 2003.
Highline Data is the data affiliate of Highline Media, the parent company of National Underwriter.
The 2005 combined ratio result, which now stands at 100.8 (including policyholder dividends), is based on annual statement data filed with the National Association of Insurance Commissioners for 2,592 individual companies, or 94 percent of the companies expected to file for 2005.
Should the combined ratio hold up at the initial level once all companies have filed and results are tallied, it would mean that there was some deterioration in underwriting results during the fourth quarter. The nine-month 2005 industry combined ratio reported by Jersey City, N.J.-based Insurance Services Offices on Dec. 27 last year was an even 100.
Two weeks prior to the ISO publication last December, analysts polled by the Insurance Information Institute in New York for an "early-bird forecast" of results predicted a 105.3 combined ratio–a result which seems well off the mark given yesterday's Highline announcement.
Earlier this year, I.I.I., in its February Groundhog Forecast, published a more optimistic forecast from the analysts, who predicted an average combined ratio of 101.8 for 2005 and 97.7 for 2006. The average 2005 prediction is a point higher than the current figure calculated from information in the Highline database.
Breaking down the components of the combined ratio based on losses, expenses, dividends and premiums in Highline's database:
o The industrywide net loss and loss adjustment expense ratio rose nearly 2 points to 74.5 in 2005 from 72.6 in 2004.
o The industry expense ratio also went up, rising to 25.9 in 2005 from 25.3 in 2004.
o With the dividend ratio for both years remaining flat at 0.4, the combined ratio for 2005 came in at 100.8 compared with 98.3 for 2004 for the 2,592 filers. (The industry aggregate combined ratios for all filers, which numbered close to 3,100, was actually slightly lower in 2004, coming in at 98.1.)
Turning to growth, net earned premiums grew only 1.1 percent to $418 billion, a jump nearly equal to the 1.0 percent average prediction for net premiums written for analysts participating in I.I.I.'s Groundhog survey.
According to Highline, the sum of net income figures for the companies reporting to the NAIC so far is $49.4 billion for full-year 2005, representing a jump of 18.5 percent over 2004 when the total was $41.7 billion.
The sum of policyholders' surplus figures for 2005, at $536.4 billion, was 9 percent higher than a surplus total calculated in the same manner, of $493.4 billion, for 2004.
True dollar figures for industry aggregate net income and policyholders' surplus, which take into account intercompany transactions, should be lower when they are ultimately reported by Highline Data in June.
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