Conning & Company Reports Property Casualty Insurers Investments in Fine Shape - for Now.

Insurance & Banking Editors

HARTFORD, Conn.--(BUSINESS WIRE)--March 25, 2002

Conning & Company

-- The Home Run Hitters earned an average 12.7% return on assets over the study
period. They achieved success by earning high returns on both bond and stock
portfolios.

-- The Equity Wave Group used a higher-than-average allocation of assets to
common stocks to earn 10.5% overall returns, even though their stock portfolio
returns were only average.

-- The Strategic Equity Investors maintained average allocations to the equity
market, but earned among the highest returns on their stock market investments.
With high equity returns and average bond returns, they achieved enviable
success.

Investment returns were the sole positive contributor to net income for the property casualty industry from 1996-2000, yet how they got there is surprising, according to a new study from Conning & Company.

Given the opportunity to "ride the bull" to higher investment returns, those property casualty insurers that avoided the temptation to expose assets to unacceptable risk ended up the biggest winners.

According to Conning's most recent study, "Property-Casualty Investment Profile-2001," there are a few surprises in how PC insurers allocated their investments. Conning discovered that the most successful insurers took various but somewhat similar paths. From 1996 to 2000, the percentage of the industry's assets invested in long-term bonds shrank from over 80% of assets to a little under 76%. During this same period, allocations to common stock equities (excluding affiliated company stock) rose from 7.9% to 9.5% of assets.

"In many ways, the business of insurance is the business of investment," said Clint Harris, Vice President at Conning & Company and author of the study. "The property-casualty insurance industry relies on investment returns as a principal, if not primary, source of operating revenue. However, we found that higher investment returns enticed insurers to write to higher loss ratios which may have caused reserve deficiencies."

Surprisingly, insurers' investment needs and goals, in general, appear to be more similar than dissimilar. Conning expected that competitive pressures and divergent underwriting models among different groups of companies - Conning divided insurers into nine peer groups - would create very different investment return pressures for the groups. For example, the Guarantee Lines Group consistently earned high underwriting profits during the study period, enabling it to adopt much more conservative investment strategies than other groups. However, while these peer groups' operating strategies differ, Conning's research confirms that there is less variation in their investment strategies. For example, all were attracted to the equities markets. Although there was some variation in the degree of shift to equities, only one group (reinsurers) actually ran counter to the overall industry trend.

In this study, Conning identifies thirty companies that distinguished themselves by their investment income performance during the 1996-2000 period. These 30 companies took a variety of paths to success, but several clear patterns were apparent:

-- The Home Run Hitters earned an average 12.7% return on assets over the study
period. They achieved success by earning high returns on both bond and stock
portfolios.

-- The Equity Wave Group used a higher-than-average allocation of assets to
common stocks to earn 10.5% overall returns, even though their stock portfolio
returns were only average.

-- The Strategic Equity Investors maintained average allocations to the equity
market, but earned among the highest returns on their stock market investments.
With high equity returns and average bond returns, they achieved enviable
success.

Property-Casualty Investment Profile 2001, is a companion to Conning's Investment Profile of the Life Insurance Industry. These studies were developed to help insurers succeed in the future by understanding the lessons of the past. The study is available from Conning & Company for $900 by calling toll-free [phone] or [phone]. A complete listing of all Conning Strategic Studies can also be found by visiting the company's Web site at www.conning.com.

About Conning

Conning Corporation, through its subsidiaries, provides asset management services to insurance companies and institutional investors, manages private equity funds investing in financial services companies, and conducts in-depth research on the financial services industry. Conning & Company (member NASD/SIPC) is located at Cityplace II, 185 Asylum Street, Hartford, CT 06103.