The U.S. reinsurance industry's vital signs are showing vast improvement over 2005′s disastrous, catastrophe-marred results, according to statistics released last week by the Reinsurance Association of America.
The Washington-based group noted a combined ratio of 95.4 for the first nine months of 2006, way down from the 124.1 reported for the same period a year earlier.
The data reflects the results of 23 reinsurers that are RAA members–representing nearly two-thirds of the gross reinsurance coverage provided by U.S. reinsurers and their affiliates.
The data also reflects the volatility of the business, as 2006 has been relatively catastrophe-free, despite predictions of a terrible year, while Hurricanes Wilma, Katrina, and other severe storm activity "definitely impacted 2005 results," said W. Scott Williamson, assistant vice president of financial analysis at RAA.
The situation was no better in 2004, he noted, as a grand slam of four hurricanes ripped through Florida.
RAA said the net loss for the 23 reporting companies in the first nine months of 2005 was $133.6 million. For the first nine months of 2006, by contrast, net income rose to $6.3 billion.
The data indicates that gross written premiums for the first nine months of 2006 rose 3.8 percent over the same period of time in 2005, with net premiums written by RAA members rising 4.2 percent. Policyholder surplus of RAA members is up 9.2 percent to $69.4 billion.
Other healthy signs include a decline in the loss ratio from 97.1 for the first nine months of 2005 to 67.8 thus far this year.
In addition, the industry's underwriting result flipped from a loss of $4.5 billion in the first nine months of 2005, to a profit of $770.6 million this time around.
"As a result, 2006 appears to be a good year for the reinsurance industry," Mr. Williamson noted, calling the combined ratio decline to 95.4 "a significant improvement."
For some individual companies, the results were extremely positive.
For example, National Indemnity Company, owned by Warren Buffet's Berkshire Hathaway, had a net profit of $4.5 billion for the first six months of 2006, raising its policyholder surplus to a group-leading $31.3 billion.
By contrast, Gen Re Group–another Berkshire Hathaway unit–showed a profit of $557.9 million for the first nine months of 2006, raising its policyholder surplus to $8.9 billion.
However, Swiss Re, which acquired the GE Insurance Solutions business of General Electric, showed a pretax loss of more than $1 billion and a net loss of $911.7 million, dropping its surplus to $7.4 billion, the RAA data indicates.
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