Aon Study: Return on Homeowners Insurance Up but Still Not Earning Its Cost of Capital.Business Editors CHICAGO--(BUSINESS WIRE)--March 17, 2003 Aon Corporation (NYSE NYSE See: New York Stock Exchange : AOC AOC, n an acronym for the Aromatherapy Organizations Council. ) announced today that significant rate and underwriting initiatives in the U.S. homeowners' insurance marketplace continue to fall short of the cost of capital, in a continuing study of return on capital by Aon Re Worldwide. The findings of the update indicate that the homeowners insurance industry is estimated to have increased its rates by 7.8% since the initial study was performed in May / June 2002 and the average hike for new rate filings in the last six months was 12.5%. "The returns still need improvement to fully recover the cost of capital and assure needed underwriting capacity for this essential line of insurance," said Bryon Ehrhart, president of Aon Re Services. "Insurers are still not making enough money on most homeowners' policies." Ehrhart said that based on filings through December / January 2003, the estimated prospective return on equity (ROE) for homeowners is 5.9% compared to six months ago when the expected return Expected Return The average of a probability distribution of possible returns, calculated by using the following formula: was 4.8%. The cost of capital for homeowners' insurers is nearly 14%, double the current return. Aon Re is monitoring this market as it recovers from inadequate and negative returns experienced by many homeowners' insurers as a result of catastrophic events over the past decade, such as Hurricane Andrew This article is about the 1992 hurricane; there was also a Tropical Storm Andrew during the 1986 Atlantic hurricane season. Hurricane Andrew is the second-most-destructive hurricane in U.S. history, and the last of three Category 5 hurricanes that made U.S. , the Northridge earthquake The Northridge earthquake occurred on January 17, 1994 at 4:31 AM Pacific Standard Time in the city of Los Angeles, California. The earthquake had a "strong" moment magnitude of 6. , several major tornado hail events and the emergence of mold claims. The study includes comprehensive analysis of rate filings for the top five homeowners' insurers in states that account for 80% of the US population. Aon plans to continue semi-annual updates to the study until the market stabilizes. The study provides a prospective outlook taking into consideration changes that have been implemented, and is adaptable to assess prospective return on capital for individual companies. Results show that although insurers have made progress from the lowest point in the current homeowners' insurance crisis, further actions to improve underwriting results and management of capital are needed. Aon offers a suite of tools to help insurers cope with the complex operational and financial issues that are now associated with the homeowners' line. Aon Re Worldwide provides traditional, alternative risk transfer and capital markets based reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. advisory and execution services to insurers and reinsurers. Aon Re Worldwide's client advisory services advisory services advisory services provided to the public, in their capacity as owners and managers of animals, are an important part of veterinary science. They may be provided by government bureaux, by commercial companies who deal in pharmaceuticals or animals or animal include dynamic financial analysis, rating agency capital modeling assistance, capital allocation and optimization services, catastrophe modeling
Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer. and capital markets structuring, and placement services. Aon Corporation (www.aon.com) is a holding company that is comprised of a family of insurance brokerage, consulting and insurance underwriting subsidiaries. Please note that Aon does not underwrite Homeowners insurance business. This press release may contain certain statements relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results, depending on a variety of factors. Potential factors that could impact results include the general economic conditions in different countries around the world, fluctuations in global equity and fixed income markets, exchange rates, rating agency actions, pension funding, changes in commercial property and casualty markets and commercial premium rates, the competitive environment, the actual cost of resolution of contingent liabilities and other loss contingencies, the ultimate impact of the business transformation plan, and the timing and resolution of related insurance and reinsurance issues relating to the events of September 11, 2001. Further information concerning the Company and its business, including factors that potentially could materially affect the Company's financial results, are contained in the Company's filings with the Securities and Exchange Commission. |
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