Dissecting A Tumultuous Decade

Considering that the property/casualty industry was buffeted by everything from terrorism to natural disaster to financial meltdowns, the sector’s financial performance for the past decade has been estimable, a new report for New York-based Fitch Ratings finds.

The report, “Property/Casualty Insurer Long-Term Financial Performance, Decade In Review: 2000−2009,” examines the 25 largest market participants over the last 10 years.  The report places Bloomington, Ill.-based State Farm Mutual Automobile Insurance Co. at the top of the list, accounting for 11.7% of new written premium in the market. Northbrook, Ill.-based Allstate Insurance Co. and the insurance entities of Omaha, Neb.-based Berkshire Hathaway came in next at 5.9% and 5.0%, respectively. Fitch noted that many of the companies with the largest growth in market share did so through large acquisitions, citing Hartford, Conn.-based Travelers Cos. Inc. and Boston-based Liberty Mutual Group Inc. as examples.

Among the metrics the report uses to gauge the strength of the industry is return on surplus. Fitch notes the decade also saw four consecutive years of double-digit returns on surplus (2004−2007). The insurers with the highest 10-year average annual return on surplus included Mayfield Village, Ohio-based Progressive Corp., Travelers, Hartford, Conn.-based The Hartford Financial Services Group Inc. and Allstate.

“The market experienced four years (2000−2002 and 2008) in which policyholders’ surplus declined due to a mixture of poor underwriting results and significant investment losses,” the report states. “Also, the industry has more recently experienced an unprecedented three consecutive years of declining written premium volume due to heightened price competition and the impact of poor economic conditions. Despite numerous challenges, the industry held its own over the last decade.”