Insurers' 1Q Underwriting Results Worst In A Decade, SNL Says
May 25 2011 - 4:58PM
Dow Jones News
Powerful earthquakes in Japan and New Zealand caused U.S.
property-casualty insurers to post their worst first-quarter profit
margins in a decade, according to data from SNL Financial.
Insurers spent nearly $1.03 on claims and expenses for every
dollar they collected in premiums, resulting in an industrywide
underwriting loss of $3.32 billion in the quarter, according to
data filed with state regulators and compiled by SNL. Both measures
were the worst first-quarter result since 2001.
The results will fuel speculation that insurers will raise
prices, especially the ones selling coverage to commercial clients.
Business insurers have suffered from years of price declines, but
the recent disasters have caused many in the industry to predict a
major reversal may be close at hand.
The catastrophes in Japan and New Zealand proved costly for U.S.
insurers doing business overseas. National Indemnity, a unit of
Warren Buffett's Berkshire Hathaway Inc. (BRKA, BRKB), reported an
underwriting loss of $984.1 million. A unit of reinsurer
Transatlantic Holdings Inc. (TRH) lost $456.2 million, SNL
said.
Still, not all of the news was bad. The value of policies sold
by commercial insurers rose 2.7%, indicating that customers were
buying more coverage. The data backs up observations from companies
including Travelers Cos. (TRV) and Liberty Mutual, two large
commercial insurers, which said demand for their services is on the
rise as the economy improves.
Among the insurers selling coverage to consumers, State Farm,
the largest U.S. home and auto insurer, recorded a $342.5 million
underwriting loss in the quarter, nearly six times greater than its
smaller rivals, SNL said.
-By Erik Holm, Dow Jones Newswires; 212-416-2892;
erik.holm@dowjones.com
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