Good news for P&C insurers: Analysis from
SNL made its assessment after seeing that U.S. property/casualty industry premiums grew at their fastest rate since 2006 in response to underwriting losses and unfavorable reserve development.
Personal and commercial lines will see hardening, which is great news for commercial lines insurers, which have been stuck in a prolonged soft market, according to SNL.
“We are seeing an end to many of the factors enabling this trend,” says Jon Wright, SNL Financial’s director of insurance. “After analyzing data for 95% of the industry, SNL Financial found that the U.S. insurance industry’s negative returns on underwriting continue to deepen and the short-term boost from over-reserving for prior years is running out. Overall premium growth continued to recover in 2010, and our findings point to further continuance of that trend in 2011.”
A combination of personal and commercial lines writers recorded strong underwriting profits in 2010. Bank of America Corp.'s Balboa Insurance Co., the force-placed homeowners’ writer in the midst of a sale to QBE Insurance Group Ltd., generated the highest net underwriting gain. Berkshire Hathaway Inc. units GEICO and National Indemnity Co. also posted significant underwriting profits
Top 5 U.S. Insurers by Underwriting Profit 2010Y Net:
• Balboa Insurance Co.—$936,741,000
• Government Employees Insurance Co.—$699,201,000
• National Indemnity Co.—$$650,094,000
• United Services Automobile Association—$564,095,000
• Federal Insurance Co.—$563,405,000
Based on key market indicators within the U.S. P&C industry, direct premiums written increased 2.9% and net premiums increased 4.0% from the same period in 2009. Underwriting losses totaled $2.4 billion, of which $750 million came from additions to reserves for prior years.
“We continue to see deterioration in profits for the P&C industry,” says Tim Zawacki, senior industry analyst at SNL Financial. “This is at least partially due to industry giant AIG, which continues to make headlines as it continues to pay for inadequate reserving over the last several years. What remains to be seen is whether AIG is acting first, and this trend is symptomatic of the entire commercial lines industry, or an isolated event.”
