U.S. P/C industry boasts profits despite cat losses.The U.S. property/casualty industry was able to absorb absorb To offset sell orders or a new security offering with buy orders. record-high catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses and report an overall operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. in 2005, as net income after taxes improved to $48.4 billion, a 20% increase from 2004 year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. results, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the A.M. Best Co. Special Report U.S. P/C Industry Reports Operating Profit in 2005 Despite Record-High Catastrophe Losses.
Segment Underwriting Trends,
U.S. P/C Industry--2005
Commercial Lines
2004 2005 2006P *
Change in Net Premiums Written % 2.9 -0.3 2.3
Change in Net Premiums Earned % 5.9 0.4 1.4
Pure Loss Ratio 60.4 58.6 58.7
Loss-Adjusted Expense Ratio 14.4 14.3 14.5
Loss & LAE Ratio 74.8 72.9 73.2
Underwriting Expense Ratio 25.0 26.0 25.4
Policyholder Dividend Ratio 0.4 0.5 0.6
Combined Ratio (Reported) 100.2 99.4 99.1
Less: Catastrophe Losses (Points) ** 2.9 6.0 3.3
Less: A&E Losses (Points) 2.0 1.3 1.6
Combined Ratio (Normalized) 95.3 92.1 94.1
Accident-Year Combined
Ratio (Normalized) *** 93.1 90.9 94.6
* As published in Review/Preview Property/Casualty Edition--2006
** Source: ISO's PCS Unit. ISO defines a catastrophe as an event
that causes $25 million or more in insured property losses.
*** Accident-year basis adjusted to exclude catastrophe losses
and prior-year reserve development
U.S. Property/Casualty Industry Financial Indicators
($ Billions)
2004 2005 2006P *
12 Months 12 Months 12 Months
Net Premiums Written $436.6 $433.5 $454.3
Net Premiums Earned 425.5 425.4 438.6
Pure Losses 255.7 261.5 261.2
Loss-Adjustment Expenses 54.2 55.8 58.2
Underwriting Expenses 108.2 111.1 115.8
Policyholder Dividends 1.9 2.0 1.82
Underwriting Income/(Loss) 5.5 (5.0) 1.6
Net Investment Income 41.1 50.8 55.5
Other Income (0.47) 1.17 0.25
Pretax Operating Income/(Loss) 46.2 47.0 57.4
Realized Capital Gains 9.1 12.1 5.0
Federal Income Taxes 14.8 10.6 15.6
Net Income 40.5 48.4 46.8
Beginning Policyholders' Surplus at
Prior Year End 354.1 402.3 433.6
Net Income 40.5 48.4 46.8
Unrealized Capital Gains 12.7 (7.1) (5.0)
Contributed Capital 8.7 15.7 9.0
Stockholder Dividends (14.4) (15.7) (12.1)
Other Chal 0.7 (9.9) (4.5)
Ending Policyholders' Surplus $402.3 $433.6 $467.8
Total Changes in PHS 48.1 31.3 34.2
Year-To-Date Change in Surplus % 13.6 7.8 7.9
* 2006 projections as estimated in Review/Preview Property/Casualty
Edition--2006
Property/Casualty Quarterly Underwriting Results
By Segment, U.S. P/C Industry--2005
Combined Ratio
Predominating First Second Third Fourth 12
Segment Quarter Quarter Quarter Quarter Months
Personal Lines 90.0 90.3 112.2 97.9 97.7
Commercial Lines 92.3 93.7 109.2 103.0 99.4
Reinsurance 111.3 120.0 2065.3 142.6 144.8
Total Industry 92.3 93.5 114.6 103.1 100.7
Source: A.M. Best Co.
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