NU Online News Service, Dec. 21, 3:53 p.m. EST
The property and casualty insurance industry suffered a 3 percent slide in third-quarter net income, causing a drop in the rate of return on surplus, but nine-month results show a robust increase of 62 percent, according to a an industry report released today.
The Jersey City, N.J.-based Insurance Services Office, in conjunction with the Property Casualty Insurers Association of America and the Insurance Information Institute, released the nine-month and third-quarter p&c industry results today, saying the industry is on the road to positive growth for the year.
"Property [and] casualty insurers' positive results for the nine-months 2010 show that insurers are well positioned to meet the needs of consumers and business owners as the economy recovers from the Great Recession," said David Sampson, PCI's president and chief executive officer, in a statement.
"It is now all but certain that the p&c insurance industry will record positive growth in 2010–the first since 2006," said Robert P. Hartwig, president of the I.I.I., in a separate statement. "While underwriting losses deteriorated marginally, the industry is still operating on a 'breakeven' basis with a combined ratio of 99.7, after excluding mortgage and financial guaranty insurers."
Michael R. Murray, ISO's assistant vice president for financial analysis, said, "Assuming the economic recovery continues, we may see some firming in insurance markets down the road as increases in demand for insurance absorb some of the excess capacity that has weighed so heavily on many insurance markets. But, for now, leverage ratios continue to indicate that insurers have excess capacity."
For the third quarter, net income dropped $332 million to $10.15 billion. Net written premiums grew more than 2 percent, or $2.48 billion to $110.7 billion. Net earned premiums rose more than 1 percent, or $1.12 billion to $107.3 billion.
The combined ratio in the quarter improved 0.3 points to 100.2.
ISO said the decline in third-quarter net income resulted from a drop in p&c insurance annualized rate of return on average surplus to 7.5 percent compared to an 8.8 percent return the year before.
Overall, nine-month net income results rose $10.23 billion to $26.7 billion. Net written premiums increased less than 1 percent, or $2.4 billion to $323 billion. Net earned premiums rose close to 1 percent, or $2.9 billion to $314.4 billion.
The combined ratio for the nine months deteriorated 0.5 points to 101.2.
"Increased profitability and rising capacity through the first three quarters are primarily attributable to improved investment market conditions, stable underwriting results and a lack of mega-catastrophes," said Mr. Hartwig. "At the same time, persistent soft market conditions and lingering, but receding effects of the deep recession continue to impact growth. While insurers remain cautious about the economy and financial market conditions, there is guarded optimism that both will continue to improve as the industry transitions into 2011."
Among some of the other report highlights:
o ISO's Property Claim Services put catastrophes striking the United States over the first nine months that caused direct insurance losses at $10.7 billion.
o Mortgage and financial guaranty insurers' net written premiums declined 14.5 percent to $4.2 billion for the nine months of 2010. Net earned premiums dropped 11 percent to $5.1 billion.
o Net investment income fell $900 million to $35 billion in the first nine months of the year, but insurers' realized capital gains on investments grew to $4 billion, more than reversing $9.6 billion in losses for the same period a year ago.
o Over the nine months, combined net investment income and realized gains rose 50 percent to $39.5 billion from $26.3 billion from the year before.
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