Insurers suffered $5.6 billion in net losses on underwriting in first-half 2008 — a $20.2 billion adverse swing from insurers’ $14.5 billion in net gains on underwriting in first-half 2007. The combined ratio — a key measure of losses and other underwriting expenses per dollar of premium — worsened to 102.1 percent in the first half of this year from 92.7 percent in the first half of 2007, according to ISO and PCI.
Insurers’ net investment gains — the sum of net investment income and realized capital gains (or losses) on investments — fell 18.4 percent to $24.8 billion in first-half 2008 from $30.3 billion in first-half 2007.
Partially offsetting the deterioration in underwriting and investment results, insurers’ miscellaneous other income rose $1.7 billion to $0.2 billion in the first half of 2008 from negative $1.5 billion in first-half 2007, and insurers’ federal income taxes declined to $5.4 billion from $10.7 billion.
The figures are consolidated estimates for all private property/casualty insurers based on reports accounting for at least 96 percent of all business written by private U.S. property/casualty insurers.
“Insurers’ 5.4 percent annualized rate of return for first-half 2008 was the fourth-lowest first-half annualized rate of return in the past 23 years and 4.4 percentage points below insurers’ 9.8 percent average first-half rate of return since the start of ISO’s quarterly data in 1986,” said Michael R. Murray, ISO’s assistant vice president for financial analysis. “But results for the insurance industry overall were affected by disproportionate deterioration in results for mortgage and other financial guaranty insurers. ISO estimates that mortgage and financial guaranty insurers’ annualized rate of return fell to negative 77.2 percent in first-half 2008 from 21.6 percent in first-half 2007. Excluding mortgage and financial guaranty insurers, the insurance industry’s annualized rate of return declined to 7.6 percent in first-half 2008 from 12.8 percent in first-half 2007, as the industry’s net income fell 38.8 percent.”
“The insurance industry remains sound and well able to fulfill its obligations to policyholders,” said David Sampson, PCI president and chief executive officer. “The current turmoil in the financial market that undermined some of the nation’s leading financial institutions had relatively little effect on property/casualty insurers, largely because of insurers’ conservative investment practices. Even with a deterioration in property/casualty insurers’ financial results in the first half of the year, consumers can be confident that insurance remains a strong and stable cornerstone of the economy.”
For more information, please go to: http://www.iso.com/index.php?option=com_content&task=view&id=3067