Catastrophe losses continued to dampen U.S. property and casualty underwriters’ results for the third quarter of 1998, according to A.M. Best Company.
The industry’s net income for the period fell 15% from the previous year’s level, due to higher underwriting losses and declining investment income. The industry’s combined ratio clocked in at 104.2 for the nine months, 3.2 points worse than the same period last year.
The deterioration in the financial results was primarily blamed on last year’s rise in weather-related catastrophe losses. Cat losses added at least five basis points to the third quarter’s combined ratio, compared with less than one point in the third quarter of 1997. The total estimated third-quarter catastrophe loss was US$3.7 billion, of which Hurricane Georges accounted for $2.5 billion after its devastation of Puerto Rico and the U.S. Virgin Islands. Hurricane Bonnie’s damage to the Southeast U.S. contributed a further $360 million.
Through the first nine months, the industry incurred about $8.3 billion in catastrophe losses. In addition to the third-worst losses in history in the third quarter, the industry posted record-high losses in the second quarter. These losses are keeping pace with the $8.9 billion yearly average for the past decade, but the 10-year average is inflated by the Northridge earthquake and Hurricane Andrew losses.
A.M. Best believes the industry’s reported combined ratio for the full year for 1998 will be slightly higher than its originally projected at 104.8, which compares with 101.6 in 1997.
Other A.M. Best announcements:
Blue Cross Blue Shield Life Insurance of Canada has been downgraded from its “A-” (Excellent) rating to “B++” (Very Good). The downgrade reflects the company’s disappointing earnings in Ontario, which continue to be affected by increased claims and narrow margins in the group health segment.
The rating agency has affirmed a rating of “A++” (Superior) on the Munich Re Group, and its reinsurance subsidiaries in Canada, Australia, South Africa, Italy, as well as to New Re, Geneva and Great Lakes Reinsurance (UK), London. Life reinsurer Munich American Reinsurance Company, Atlanta, was assigned a rating of “A+” (Superior).
Bavarian Reinsurance Co. of Munich, Germany has been affirmed the “A++” Superior rating reflecting the company’s financial strength, underwriting discipline and client-focused strategy, which has translated into consistent profitable operating results.