Fitch questions U.S. P&C industry’s ability to rebound immediately from 2008 losses

The U.S. property and casualty market’s ability to rebound in 2009 remains questionable, as a broad market pricing turn is not materializing from the losses of 2008, Fitch Ratings says in its Year-End 2008 Review.
The report is a compilation of full-year GAAP 2008 financial results for Fitch Ratings’ universe of 49 publicly traded (re)insurers.
Performance for the year for this group showed flat or reduced premiums in many cases, poorer underwriting results due to weaker pricing and significantly higher catastrophe-related losses, particularly due to Hurricane Ike, the report says.
The net income ROAE (return on average equity) for Fitch’s aggregate universe, excluding AIG, dropped to an anemic 2.4% in 2008 from 14.6% the year prior.
The GAAP incurred loss ratio rose 6.9 percentage points to 69.0% and the GAAP expense ratio increased by 1.6 points to 28.2% in 2008, Fitch reports.
The aggregate group reported an overall combined ratio of 97.2% versus 88.7% in 2007. Twelve insurers in Fitch’s group reported a combined ratio above 100% in 2008, compared to only two in 2007.
The aggregate group reported a net loss of US$91.7 billion versus a US$54.8 billion net gain in 2007, with the bulk of the decrease coming from the pre-tax realized investment losses of US$112.8 billion, US$84.1 billion of which was suffered by AIG, Fitch reports.
Excluding AIG, the group’s aggregate net income still dropped almost 85% to US$7.6 billion from US$48.6 billion in 2007.
Of the 49 companies, 18 of these insurers posted a net loss for the period. In 2007, only one company, PMA Capital, reported a net loss.