Early second-quarter earning reports point to solid results in the property/casualty sector, according to Fitch Ratings. The Travelers Companies Inc., Platinum Underwriters Holdings, W.R. Berkley Corp., and Ace Ltd. recently reported strong second-quarter and year-to-date earnings, and Fitch's P&C outlook for 2013 calls for better operating results relative to 2012, given improved pricing across product lines.

While the rating agency expects premium rate improvements through the remainder of 2013, the magnitude of increases will diminish. With hurricane season still in its early stages, catastrophe loss experience is the biggest source of future earnings volatility for the second half of the year. Favorable loss reserve development continues to shrink, but continues to positively influence earnings, according to Fitch.

Property/casualty insurers continue to benefit from premium rate increases in nearly all major commercial and personal product lines following several years of inadequate pricing and severe market competition. Fitch believes this trend is likely to diminish as strong capital levels and ample underwriting capacity promote market competition.

Growth in insurers' reported shareholders' equity in the second quarter is affected by reductions in unrealized investment gains as interest rates moved upward recently. Portfolio yields still remain near historically low levels, adding pressure on companies to produce stronger underwriting profits to meet return on capital objectives.


Second-quarter return on equity for Travelers was 14.6 percent with net income reaching $925 million, up significantly from $499 million in the second quarter of 2012. The Business Insurance and Personal Insurance segments contributed heavily to the improvement, while the Financial, Professional & International Insurance segment reported solid, but lower results than the comparable quarter of 2012. Underwriting margins and lower catastrophe losses led to a consolidated GAAP combined ratio of 94.3 percent, relative to 100.5 percent for the same quarter of 2012. Favorable reserve development helped the second quarter 2013 combined ratio by 3.5 percentage points, while catastrophe losses added 6.1 percentage points to the combined ratio.

Travelers' also announced expense saving measures in its Personal Insurance segment, according to Fitch. These cost reductions primarily target personal auto, which has experienced a decline in new business. Most of the expense savings will come from attrition and staff reductions of approximately 450 employees with a goal of providing a more competitively priced product.

Ace Ltd.

Ace reported net operating income of $790 million for the second quarter of 2013, up 6.3 percent from the comparable period in 2012. Premium growth and margin improvement in Ace's property/casualty business resulted in a combined ratio of 87.9 percent compared to 88.7 percent in the same quarter of 2012. Favorable reserve development benefited the combined ratio by 3.6 percentage points in the second quarter of 2013, nearly unchanged from 2012. Management acknowledged benefits from price increases, but at a moderating pace.

Platinum Underwriters Holdings Ltd.

The reinsurer reported net income of $49.9 million and diluted earnings per common share of $1.61 for the quarter ended June 30, 2013. The results for the quarter include net premiums earned of $142.9 million, net favorable development of $44.1 million, net investment income of $17.8 million and net realized gains on investments of $11.7 million, partially offset by $18.6 million of losses from second-quarter major catastrophes. From 2012 to 2013 combined ratio decreased 1.9 percentage points to 74.4 percent.

W.R. Berkley

The insurer reported net income of $116 million for the second quarter of 2013, up more than 6 percent from the comparable quarter in 2012. The results were driven by improved underwriting margins, overcoming continued declines in investment income. W.R. Berkley's domestic insurance business was the foundation of the solid quarter, posting a GAAP combined ratio of 95.4 percent for the second quarter of 2013 relative to 97.8 percent from one year earlier.

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