OLDWICK, N.J.--(BUSINESS WIRE)-- Challenging market conditions, the financial crisis and the recession drove profitability downward for the U.S. workers' compensation market in 2008, and A.M. Best Co. expects the impact to linger through 2009 and well into 2010. Meanwhile, changing regulatory issues and reforms are continuing to affect workers' comp, bringing turmoil in terms of pricing, competition, loss costs, frequency, severity and profitability.

• A.M. Best's workers' compensation composite, which consists of 103 groups and unaffiliated single companies (including state funds), saw net income deteriorate by $1.4 billion, or 62%, to $0.9 billion in 2008.
• This drop in earnings reflected both the fall in the financial markets and sharply reduced premium volume due to persistent soft pricing, competition, legislative reforms, the recession, rising unemployment and shrinking payrolls.
• The composite's 2008 net premiums written (NPW) fell to its lowest level since 2000, down approximately 30% from its high of $20.9 billion in 2004.
• After posting relatively strong underwriting results in 2005 and 2006, the composite recorded underwriting losses of $1.2 billion and $1.5 billion in 2007 and 2008, respectively, with combined ratios of 106.5 and 110.8 for the same periods.

• NPW in the workers' comp line of business fell for the third consecutive year in 2008, declining about 12.0%”far faster than the 2.0% decrease for the overall U.S. P/C industry.
• The workers' comp line reported a calendar-year combined ratio of 104.4 in 2008, up only slightly from 103.6 in 2007, but up sharply from the low of 98.5 reported in 2006.

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Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

A.M. Best Co.

Analysts

Edward Keane

(908) 439-2200, ext. 5291

edward.keane@ambest.com

or

Brian O'Larte

(908) 439-2200, ext. 5138

brian.o'larte@ambest.com

or

Public Relations

Jim Peavy

(908) 439-2200, ext. 5644

james.peavy@ambest.com

or

Rachelle Morrow

(908) 439-2200, ext. 5378

rachelle.morrow@ambest.com

Source: A.M. Best Co.