A.M. Best Report: U.S. P/C Industry's Profits Plunge; Insurers Poised for Turnaround.OLDWICK, N.J. -- Deteriorating underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. and investment results drove the U.S. property/casualty industry's net income down by nearly 80% to $14.0 billion in 2008. * Declining underwriting results and weak investment markets have brought property/casualty insurers to a critical point where future profitability depends on strict adherence to underwriting and reserving discipline--even at the expense of market share. * After falling in 2007, net premiums written are expected to show another decrease for 2008, driven by competition in practically all lines and leakage LEAKAGE. The waste which has taken place in liquids, by their escaping out of the casks or vessels in which they were kept. By the act of March 2, 1799, s. 59, 1 Story's L. U. S, 625, it is provided that there be an allowance of two per cent for leakage, on the quantity which shall appear of premium to non-U.S. companies, as well as macroeconomic mac·ro·ec·o·nom·ics n. (used with a sing. verb) The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. factors that include the current recession, the credit crisis, the housing correction, rising unemployment and higher energy prices. This is the first back-to-back decrease in premium since 1932-33. * Two consecutive years of underwriting profits Underwriting profit is a term used in the insurance industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums. are expected to give way to an underwriting loss of $21.5 billion for 2008, driven by a continued soft market, sizable and frequent weather-related losses, and the impact of significant losses in the mortgage and financial guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. sectors. * A.M. Best Co. estimates the industry will recognize nearly $11.0 billion of favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. loss-reserve development in 2008--even higher than the $9.0 billion recorded in 2007--thus further eroding the industry's overall loss reserve position. * Uncertainty in investment markets will continue to impact most strategic decisions including pricing and participation in mergers and acquisitions (M&A). As balance sheets begin to weaken, the window for sensible M&As may be closing. * Although policyholders' surplus decreased an estimated 10% in 2008, excess capital absorbed much of the decrease, and the overall industry remains sufficiently capitalized to meet the current challenges in underwriting and the financial markets. Access a copy of this special report. BestWeek subscribers can download a PDF (Portable Document Format) The de facto standard for document publishing from Adobe. On the Web, there are countless brochures, data sheets, white papers and technical manuals in the PDF format. copy of all special reports as well as the associated spreadsheet data. Non-subscribers can access an excerpt ex·cerpt n. A passage or segment taken from a longer work, such as a literary or musical composition, a document, or a film. tr.v. ex·cerpt·ed, ex·cerpt·ing, ex·cerpts 1. of each special report and purchase individual reports and spreadsheet data. Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com. |
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