Insurers Post Record Loss in First Quarter, ISO Says

Jun 29th, 2009 | By Hot News Reporter | Category: Insurance Today

(Bloomberg) – U.S. property and casualty insurers, a group including American International Group Inc. and Allstate Corp., posted a record loss in the first three months of the year as investments slipped and claims exceeded premiums, an industry group said.

“Property-casualty insurers absorbed a pounding” in the first quarter, said Michael Murray, assistant vice president for financial analysis at Insurance Services Offices Inc., in a statement today. The industry reported a $1.3 billion net loss, compared with an $8.5 billion profit in the year-earlier period, according to Jersey City, New Jersey-based ISO.

Losses have widened as the recession lowered the value of bonds backing policies and carriers reduced prices to maintain business from cash-strapped clients. New York-based AIG lost $4.4 billion in the first quarter and Allstate, of Northbrook, Illinois, reported a deficit of $274 million.

Policy sales dropped by a record 3.6 percent in the first quarter to $106.4 billion, ISO said. Policyholders’ surplus, a cushion against unexpected levels of claims, fell by $19 billion, or 4.2 percent, to $437.1 billion on March 31 from the end of December, ISO said.

Price cuts will probably cause underwriting results to deteriorate this year across the industry, Brian Nocco, chief financial officer at Bermuda-based XL Capital Ltd., said in a June 1 interview. Credit rating downgrades have made it harder for carriers including AIG, XL and Allstate to maintain business and win new clients.

‘Wounded Animals’

“There are a lot of wounded animals out there and people who are trying to preserve their market share,” Nocco said. Companies are selling coverage below cost “to a greater degree than is sustainable in the long term.”

Travelers Cos., which has remained profitable throughout the credit crisis, reported a 2 percent increase in first- quarter policy sales by providing more coverage to the company’s biggest clients. Chubb Corp., which had net income of $341 million in the first-quarter, posted a 6 percent slide in commercial-insurance sales.

The industry’s unrealized investment losses, which aren’t deducted from earnings, widened by $16.4 billion in the first three months of the year, ISO said. Carriers paid stockholders $2.1 billion in dividends in the period, according to the group.

ISO said its market data extends back to 1986. The industry is more vulnerable to losses in the second half of a year because of the U.S. hurricane season.

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