Insurance is a complex business, but it all boils down to this: To be financially successful, carriers must collect enough premium dollars to cover claims and expenses. The tricky part, of course, is maintaining underwriting discipline in a competitively charged market when annual premium increases begin to decline.That, in essence, is where the property/casualty market stands today. The financial turnaround that has been achieved during the past three years is remarkable: In 2001, the combined ratio for U.S. P&C insurers was a staggering 116. In the aftermath of the September 11 terrorist attacks, industry economists believed that the financial aftershocks would hurt balance sheets for many years. They were dead wrong.
The P&C industry posted a combined ratio of 97.9 for the first nine months of 2004, compared with 100.3 during the same period in 2003. The industry's net income soared 28.3% to $26.7 billion during the first nine months of 2004, and the industry's surplus rose 6% to $369 billion at the end of September.
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