ointing P&C 3Q, 9-Month Results

year compared to last year. Additionally, realized investment gains are lower, totaling $4.2 billion in the current year so far compared to $5.9 billion in the first nine months of 2010.

Specialty-commercial insurers
have seen the best results of
commercial-lines subsegments over
the first nine months, which Fitch
says is a trend that has continued over
the past several years: “The group’s
aggregate combined ratio rose by 5. 9
points to 98.1, but was still the only
segment in Fitch’s analysis to produce
an underwriting profit.”
The segment benefited from favorable
loss-reserve development, which trimmed
5. 9 points from the aggregate combined
ratio—but that favorable development is
down from the 6. 4 points trimmed in the

9 Months

2011

9 Months

2010

77.0 67.6

28. 4 28. 5

105.3 96.0

UNDERWRITING PERFORMANCE
(For group of 47 publicly traded
P&C insurers and reinsurers)

Loss Ratio Expense Ratio Combined Ratio Combined Ratio, Excl.

Reserve Development 108.2 99.5 Combined Ratio, Excl. Cat Losses and Reserve Development

94.5 93.7

Sources: Fitch Ratings, Highline Data, company data

$9.7 BILLION - Aggregate net profit for
a group of 47 publicly traded U.S. and
non-U.S. insurers and reinsurers through
the first nine months of 2011 analyzed
by Fitch Ratings. Compare that with a
net profit of $26.4 BILLION during
the same period last year.

first nine months of 2010.

For personal lines, the aggregate combined ratio jumped from 95.7 to 102.4 as the sector was hit by Hurricane Irene on the U.S. East Coast and heavy U.S. tornado activity and winter-storm losses earlier in the year.

Commercial-diversified insurers’ combined ratio is 104.6 for the year so far, compared to 96.6 at this time last year. Fitch said only two insurers in its group for this sector—ACE Ltd. and Hartford—produced accident-year combined ratios under 100.

Reinsurers in Fitch’s group saw their
aggregate combined ratio climb to 117.3
in the first nine months of the year, up
from 93.1 a year ago, due to first-half
catastrophes such as earthquakes in New
Zealand and Japan, Australian floods, and
U.S. storms. Reinsurers did report a third-
quarter underwriting profit, Fitch said,
as Hurricane Irene losses centered more
toward primary writers.

during the first nine months for the group was recorded by American Agricultural Insurance Co., which also recorded a net underwriting loss of $123.4 million and a combined ratio of 145.2—which also led the group after nine months.

Pointing to P&C trends over the year so far, Fitch says capital generation is at a standstill, loss-reserve releases are moderating, catastrophe losses are compounding and there has been a sharp drop in return on capital. However, Fitch notes that signs of a pricing shift have materialized.

Fitch believes this price reaction is well overdue, “but it remains unclear if momentum will hold for further pricing improvement that is necessary to return the broader market to adequate return on capital levels.”

Moody’s adds in its Special Comment that while 2011 will be remembered for significant catastrophes, it may also be remembered for the industry reaching an inflection point for pricing after multiple years of declines. “The recent stabilization in pricing and relatively benign loss costs should help stem deterioration in future underwriting performance as the premiums are earned,” Moody’s says.

108.8 - The combined ratio for a group of 19 U.S. reinsurers during the first nine months of 2011.

96.6 - The group’s combined ratio during the same period in 2010.

Source: Reinsurance Association of America

“However, P&C insurers face headwinds
from weak underwriting margins year-to-
date, low investment yields and sluggish
economic growth.”
Moody’s believes these challenges
should help fuel further price increases for
P&C insurers. NU