Fitch: P/C Sector to Continue to See Cuts in Profits Heading into ‘09
According to Fitch Ratings' mid-year report on the property/casualty industry, decreasing premium rates and lower investment income will continue to cut into profits as we head into next year.
"I think the underwriting results are rapidly approaching the point at which companies are going to be challenged to produce an underwriting profit," said New York-based Fitch analyst Gregory W. Dickerson.
"From a capital position, the industry is continuing to be strong, but there is no sign of prices improving anytime in the near future."
The 50 property/casualty organizations that were part of the report saw first-half profits bolstered by loss reserve releases, which trimmed an estimated 2.9% off the insurers' combined ratio. That reserve releases, however, could soon diminish says the Fitch report.
"The industry still remains adequately reserved, but reserve redundancy has diminished," Mr. Dickerson said. "I think the industry's reserve cushion is thinner than it has been."
Insurers and reinsurers during the first half of 2008 earned combined profits of $1.8 billion, a sharp drop from $33.3 billion in the same period last year. According to the report, most of the reduction in profits was due to investment losses.
Published on August 29, 2008
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