A report released by A.M. Best indicates that U.S. property and casualty insurers incurred an adverse loss-reserve development of about US$22 billion for 2002. The rating agency notes that the final quarter of the fiscal year usually reflects the greatest amount of reserve adjusting, which last year saw AIG and the Travelers group “leading the pack” of companies with adjustments of US$2.8 billion and US$2.5 billion. Reserve adjustments made specifically for anticipated asbestos losses accounted for 2.4 percentage points of the industry’s combined ratio of 107.2% for 2002 (in comparison, insured losses from the 9/11 terrorist attacks represented 2.9 percentage points of 2001’s combined ratio of 115.7%). Despite the reserve strengthening actions taken by companies last year, the rating agency believes that the industry’s reserves continue to be significantly short – primarily in commercial lines. A.M. Best’s financial analysis of the U.S. industry’s performance last year suggests that net written premiums rose by 15.3% year-on-year, with the fourth quarter producing a 11.6% gain on the same period for the year prior. The industry’s underwriting loss for last year fell by 28% compared with that of 2001 (excluding the 9/11 losses), which saw the combined ratio drop to 107.2% for 2002 against the 115.7% reported the year before. Much of the underwriting improvement resulted from significantly reduced catastrophe losses for 2002, while broad price strengthening offset the general rise in claims costs. However, the rating agency notes, “A.M. Best believes pricing in a number of large market segments, particularly homeowners, commercial multiple peril, medical malpractice and workers’ compensation is still below adequate levels”. Although net investment income improved during 2002, the industry’s bottom-line remained under pressure due to the ongoing weakness in the equity markets which reduced the industry’s opportunities for realized gains, the rating agency says. A.M. Best has not released specific financial figures for the industry, nor quantified the number of companies’ returns used in its analysis.