U.S. P&C 2008 industry profits sliced in half

The U.S. property and casualty industry’s net income after taxes fell more than 50% to US$15.9 billion in the first half of 2008, reports A.M. Best Company, Inc.
In a special report, the rating agency cites a combination of deteriorating underwriting results and declining investment returns for the plummet in profits.
The industry’s underwriting performance weakened in the first six months of 2008 as a result of continued price softening, challenging market conditions, unusually high catastrophe losses and significant underwriting losses reported by mortgage and financial guaranty insurers, the report says.
As a result, the overall combined ratio deteriorated to 102.1% in the first half of 2008, up from 93% in the same period of 2007.
“The sharp decline in the industry’s operating performance, combined with the accumulation of ‘excess’ capital, drove overall profitability measures downward through the first half of 2008,” A.M. Best observes.
Net premiums written declined approximately US$1.6 billion, or 0.7% (down to US$224.3 billion), through the first half of 2008. They were US$225.9 billion during the same period of 2007.
“As housing prices have slumped across the country, historically high mortgage defaults have sparked a surge in claim activity, forcing mortgage and financial guaranty insurers to increase loss reserves,” the report says.
"As a result, the two segments collectively reported an underwriting loss of US$4.7 billion and posted a combined ratio of 245.9% though the first six months of 2008."