Weiss: P/C Insurers Report First Underwriting Profit Since 1997

Dramatic improvements in underwriting performance by the nation’s property/casualty insurers led to the first underwriting gain in nearly seven years, according to the Jupiter, Fla.-based financial analysis firm Weiss Ratings Inc.. The industry reported a $5.5 billion net underwriting gain in the first quarter of 2004, compared to the $1.1 billion loss reported during the same period a year ago.

Property/casualty insurers reporting the largest improvement in underwriting performance included Hartford and exclusive agent companies State Farm and Allstate.

“The strong profitability is the result of several years of rate increases combined with stricter underwriting standards,” according to Melissa Gannon, vice president of Weiss Ratings. “There is a sense that the industry is trying to level out the swings in the business cycle by maintaining tighter underwriting standards going forward, rather than returning to the lax standards of the soft market. If this continues, premium rates should level off or even decline.”

Investment Income Up 182%

Property/casualty insurers also enjoyed a surge in net realized capital gains, earning $3.2 billion on the sale of investments in first quarter 2004, representing a 182.1 percent increase compared to the $1.1 billion reported during the same quarter in 2003. The performance in the market, coupled with insurers’ solid underwriting performance, contributed to industry earnings of $13.6 billion, a $6.5 billion, or 91.5 percent, profit jump over the $7.1 billion earned in the first three months of 2003.

Hartford, State Farm and Allstate also saw the biggest improvement in year-over-year net income, according to the Weiss report. Among the 2,463 property/casualty insurers reviewed by Weiss, 15 companies were upgraded, while 17 were downgraded.