A.M. Best Statistical Study: Catastrophes Propel Property/Casualty Insurers to Losses.

OLDWICK, N.J. -- Despite the solid results posted for the first half of 2005, the U.S. property/casualty industry recorded an underwriting loss of $2.8 billion through September 2005, down from the $13.3 billion profit the industry experienced in the first six-months of 2005, according to a recent study by A.M. Best Co. The underwriting loss is primarily due to third-quarter U.S.-insured catastrophe losses that contributed to an estimated total of $31.7 billion through the first nine months of 2005, the industry's worst nine-month period ever. This underwriting loss also represents a $6.2 billion change of direction when compared with the results reported during the comparable period of 2004, when the industry turned a $3.4 billion profit.

The 2005 hurricane season was the most active on record, with 19 named storms through the first nine months--most notably Katrina and Rita, with Katrina topping the list at an estimated $23.5 billion in U.S.-insured losses to date. This compares with the first nine months of 2004, when there were 13 named storms and roughly $15 billion in insured catastrophe losses.

The property/casualty industry experienced the seventh consecutive quarter of rate reductions, with commercial accounts experiencing an average third-quarter premium decrease of 8.2%, according to the Council of Insurance Agents & Brokers' Commercial Market Index Survey. As expected in a softening market, A.M. Best Co. data show net premiums written for the entire industry decreased only 0.3% when compared with the nine-month period of 2004.

With the trend of softening market conditions and significant insured catastrophe losses through the first nine months of 2005, the property/casualty industry's combined ratio, a key measure of underwriting profitability, increased 2 points to 99.9 through September 2005, up from the nine-month 2004 combined ratio of 97.9. The current combined ratio is also up 6 points from the first six months of 2005, which further illustrates the impact of the third-quarter hurricane losses and continuing trend in market conditions.

With this year's hurricane losses much more frequent and severe than in 2004 and market conditions softening in most sectors, financial performance may not be comparable to the sound results the industry experienced in 2004, and insurers may fall short of their target results for 2005.

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A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.