February 8, 2010 by Canadian Underwriter
The financial results of the U.S. property and casualty industry in 2009 represent a radical departure from the anemic results in 2008, according to a recent report by A.M. Best.
“The U.S. property/casualty industry’s operating results recovered in 2009 from a catastrophe-riddled 2008, driven by improved underwriting results and the continued recovery in the financial markets,” A.M. Best said in its special report, U.S. P/C Industry’s Profits Rebound; Challenges to Persist.
“A.M. Best expects the industry’s net income after taxes to improve to $30.6 billion for 2009, up almost ten-fold from the $3.8 billion reported in 2008.”
A.M. Best says the results improved for several reasons, including:
• underwriting results benefited from a quiet hurricane season (“Catastrophe-related losses are estimated at $14 billion for 2009, down from an estimated $23 billion paid in 2008, as the 2009 Atlantic hurricane season was the quietest in more than a decade,” the reports says.);
• significantly lower underwriting losses in the mortgage and financial guaranty segments;
• favourable prior-year loss-reserve development; and
• investment performance benefited from the rally in the financial markets.
And yet, although net income is on the way up, net premiums written are on their way down.
“For the first time in A.M. Best’s recorded history, net premiums written have declined in three consecutive years,” A.M. Best’s report says.
“A.M. Best estimates NPW fell about 4.2% to $426.8 billion in 2009, driven by a prolonged period of competitive market conditions; excess capacity; leakage of premium to non-U.S. companies; alternative forms of risk transfer; and the weak economy.”
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