P-C Sector Should Avoid Red Ink For Full-Year Results

Despite some grim results for the first nine months of 2008, the property-casualty sector is unlikely to end the year in the red, one of the insurance industry's premier economists and leading spokesman predicts.

“It doesn't appear [the insurance industry] will wind up with a loss for the year,” said Robert P. Hartwig, president of the Insurance Information Institute.

His comments came the day after the Insurance Services Office and the Property Casualty Insurers Association of America reported that for the first nine months, the industry's net after-tax income dropped 91.8 percent to $4.1 billion, down from $49.6 billion last year. The industry also reported a net loss of $9.9 billion for the third quarter.

Mr. Hartwig pointed out that compared with the third quarter, underwriting losses for the fourth quarter will be much less.

In addition to light fourth-quarter catastrophe losses, Mr. Hartwig said investment returns for the current period have been solid–even though there will be a net realized investment loss and a net unrealized loss for insurer portfolios for the full year.

In the event p-c insurers report a combined net loss, Mr. Hartwig said it would only be the second time the industry ended up in the red–with the first occasion coming in 2001, when carriers were hit hard by a poor investment environment and the losses from the 9/11 terrorist attacks.

For the coming year, Mr. Hartwig said there are reasons for cautious optimism, adding it would be difficult to envision the financial environment remaining as difficult as it has been in 2008. “It's quite unlikely we will see a [stock] market decline of the same magnitude,” he said.

Mr. Hartwig added that interest rates would be lower, thus impacting bonds–which are insurers' primary investment income. But if the economy expands in the second half of 2009, there should be opportunities for premium growth with increased sales in homes, autos and other lines, he added.