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BEST REPORT: JANUARY EARTHQUAKE, WINTER STORMS BOOST PROPERTY/CASUALTY'S 1ST QUARTER COMBINED RATIO TO 117

 OLDWICK, N.J., April 18 /PRNewswire/ -- A.M. Best Company estimates the property/casualty industry's combined ratio deteriorated sharply in the first quarter to 117, versus 105.5 for the fourth quarter 1993, mainly due to huge catastrophe claims in the U.S., according to a just-released study.
 The special report, "Fourth-Quarter Review: Pleasant Surprise! First-Quarter Preview: Back in the Tank!" concluded January's Northridge earthquake in California and a relentless series of East Coast winter storms in the first quarter raised the likelihood that the 1994 full- year ratio will worsen to 111.0, versus 106.9 in 1993. And given the prospects for a sharp reduction in realized and unrealized capital gains, only an estimated $2 billion increase in industry capital and surplus is expected, according to John H. Snyder, senior vice president of A.M. Best's property/casualty division.
 As noted in an earlier special report ("Best's Earthquake Study," March 28, 1994), the quake has cost insurers an estimated $5.3 billion. In this week's report, Mr. Snyder wrote, "Although we have taken no formal survey of the winter storm damage, we believe it easily cost $2 billion."
 A.M. Best doesn't expect any insolvencies as a direct result of the earthquake, but the winter storms could cause financial havoc for some insurers. Because the storms generated hundreds of thousands of small claims spanning several occurrences, most companies' reinsurance programs probably won't respond, Mr. Snyder said. This could produce large net losses for many of these single-state and regional companies, particularly in New England, Pennsylvania and New Jersey.
 "A.M. Best is currently reviewing 1993 financial results for all of our companies under coverage," Mr. Snyder noted, "and we are paying close attention to all of the companies subject to the winter storm losses. We expect a number of rating downgrades will result from this review."
 The updated "Review & Preview" report also explains that A.M. Best's earlier estimates for 1993 fourth-quarter results were too pessimistic because of stronger than expected underwriting results.
 "Although we came within a percentage point of accurately predicting the fourth quarter's increase in writings -- 6.9% versus an actual figure of 7.8% -- we substantially overestimated the quarter's combined ratio of 114.5, versus an actual 105.5," Mr. Snyder said.
 This nine-point improvement reflected roughly $5 billion less in underwriting losses than A.M. Best expected. The fourth quarter's combined ratio was a slight improvement over the third quarter and led to the full year ratio of 106.9, versus an estimated 109.2. The full- year 1993 ratio was 8.9 points better than 1992's hurricane-battered combined ratio of 115.8.
 Copies of the report may be obtained by calling Rhonda J. Ruch at 908-439-2200, x5684.
 -0- 4/18/94
 /CONTACT: John H. Snyder of A.M. Best Company, 908-439-2200, x5449/


CO: A.M. Best Company ST: New Jersey IN: INS SU:

CB -- NY094 -- 8859 04/18/94 14:14 EDT
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Date:Apr 18, 1994
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