Regional Insurers Show Underwriting Improvement in 2012; Still Lag Other Subsectors

Regional insurers saw a significant improvement in 2012 underwriting results compared to 2011, but only one of six such companies studied by Fitch Ratings managed an underwriting profit for the year, and regionals posted a higher 2012 combined ratio than any other subsector Fitch analyzed. 

“Cincinnati Financial Corporation was the only one of the six regional insurers to post an underwriting profit in 2012,” says Fitch in its report, U.S. Property/Casualty Insurers' Year-End 2012 Financial Results. ”None of these companies reported a combined ratio less than 100 in 2011 and no regional insurer reported an accident year underwriting profit during either period.”

But, thanks to lower catastrophe losses, regional insurers, along with reinsurers, did show the greatest underwriting-performance improvement for the year out of a group of 48 publicly-traded P&C companies Fitch analyzed. 

The entire group posted a 98.6 combined ratio, down from 103.4 in 2011.

The regional insurers Fitch studied posted a 101.9 combined ratio, highest out of all subsectors, but a significant improvement over the 108.6 combined ratio in 2011.

The group of 48 includes 31 commercial insurers, which posted a combined ratio of 99.9 for 2012, down from 103 in 2011. “A total of 19 companies in this group reported a combined ratio below 100 for the year, but only eight maintained this underwriting profit on a current accident year basis,” says Fitch. 

Fitch adds, “Specialty writers, particularly those that have limited or no exposure to property insurance, continued to represent the best underwriting performers in this group, followed by diversified commercial writers, with regional insurers remaining the weakest performing group.”

Personal-lines insurers were able to post a 96.5 combined ratio despite the impact from Superstorm Sandy. The figure is down from 99.9 in 2011. “At an individual company level, however, only three of the six companies reviewed had a better 2012 combined ratio than the previous year, and only two of the six (Allstate and Horace Mann) had a better combined ratio, excluding points from catastrophe losses,” Fitch notes.