Property/casualty insurers more than doubled their profits during 2003, earning $32.3 billion compared to the $13.5 billion reported in 2002, according to Weiss Ratings Inc., an independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.
Property/casualty insurers reporting the largest year-over-year increases in net income include:
State Farm Mutual Automobile Ins Co.
American Re-Insurance Princeton,
Firemans Fund Insurance
Allstate Insurance Company
Continued improvement in underwriting was responsible for property/casualty insurers’ extraordinary performance as the industry dramatically reduced its underwriting loss to $2.9 billion in 2003, compared to the $28.2 billion loss reported a year ago.
“Escalating premiums have caused profits to soar, but improved underwriting performance is paramount to the industry’s long-term financial strength,” said Melissa Gannon, vice president of Weiss Ratings, Inc.
A strong performance by the stock market helped boost property/casualty insurers’ investment portfolios, which reported a net investment gain of $47.8 billion compared to $46.4 in 2002. One component of the net investment gain, net realized capital gains, jumped 103 percent, as the industry reported earning $6.3 billion on the sale of investments in 2003 compared to only $3.1 billion in 2002.
Likewise, the rise in the equity market produced a $34.5 billion net change in unrealized gains for the industry, which contributed to a $71.6 billion, or 19.2 percent, increase in capital and surplus, from $373.2 billion at Dec. 31, 2002, to $444.8 billion at December 31, 2003.
Insurers reporting the largest increases in capital and surplus were:
State Farm Mutual Auto Ins.
National Indemnity Co.
Allstate Ins. Co.
Columbia Ins. Co.
Liberty Mutual Ins. Co.
Notable Upgrades and Downgrades
Among the 2,480 property/casualty insurers reviewed by Weiss, 126 companies were upgraded, while 107 were downgraded. Notable upgrades include:
— Erie Insurance Exchange (Erie, Pa.) from C to B-
— Iowa Mutual Ins. Co. (De Witt, Iowa) from C- to C+
— Plateau Casualty Co. (Crossville, Tenn.) from D+ to C
Notable downgrades include:
— Atlantic Mutual Ins. Co. (New York, N.Y.) from C to D+
— Landmark American Ins. Co. (Englewood, Conn.) from B- to C
— Putnam Reinsurance Co. (New York, N.Y.) from B to C+
The Weiss Safety Ratings are based on an analysis of a company’s risk-adjusted capital, reserve adequacy, profitability, liquidity, and stability. The latter category combines a series of factors including asset growth, premium growth, strength of affiliate companies, and risk diversification.
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