U.S. P&C industry profits tumble 96.2% in 2008

The net income of private U.S. property and casualty insurers tumbled 96.2% in 2008 — from US$62.5 billion in 2007 to US$2.4 billion in 2008, according to the Property Casualty Insurers Association of America (PCI) and Insurance Services Organization (ISO).
The figures are consolidated estimates for all private U.S. property and casualty insurers, based on reports accounting for at least 96% of all business written by such insurers, PCI and ISO say in a joint release.
Reflecting the decline in net income, the insurance industry’s overall rate of return on average policyholders’ surplus dropped to 0.5% in 2008 from 12.4% in 2007.
Property and casualty insurers suffered US$21.2 billion in net losses on underwriting in 2008 — a US$40.5-billion adverse swing from insurers’ US$19.3 billion in net gains in 2007, the release says.
The industry’s combined ratio worsened to 105.1% last year from 95.5% in 2007, PCI notes.
Insurers’ net investment gains — the sum of net investment income and realized capital gains (or losses) on investments — fell 50.9% to US$34.1 billion in 2008 from US$64 billion in 2007.
“The ‘perfect storm’ that beset the industry in 2008 Q3 continued unabated in the fourth quarter, as the downturn in the economy gathered momentum and financial markets tumbled,” said Michael R. Murray, ISO’s assistant vice president for financial analysis.
“Yet, aside from some problems in the mortgage and financial guaranty sector, the p/c insurance industry emerged intact,” he continued.
“But make no mistake — insurers absorbed a pounding last year. Insurers’ net income in 2008 would have been the lowest in more than two decades if not for the net loss the industry suffered in 2001, when terrorists destroyed the World Trade Centre.”