U.S. Property/Casualty Industry's Profit Squeezed on Both En

OLDWICK, N.J.--(BUSINESS WIRE)--The U.S. property/casualty industry was impacted by a series of unprecedented events in 2008, including exceptionally challenging market conditions, the worst financial crisis in recent history, the fourth-highest year on record for U.S. catastrophe-related losses, and turmoil in the mortgage and financial guaranty segments. Nevertheless, the industry weathered the storm and generated a net profit of approximately $6.1 billion for the year, albeit down significantly from $65.5 billion recorded in 2007.

• Net premiums written fell 1.8% to $439.9 billion in 2008, the first time NPW has declined in consecutive years since 1932 and 1933.
• Driven by challenging market conditions, including continued rate pressure, large and frequent weather-related losses, and significant losses posted by mortgage and financial guaranty insurers, the industry recorded an underwriting loss of $20.0 billion in 2008, down from an underwriting gain of $21.6 billion in 2007.
• The industry’s combined ratio deteriorated almost 10.0 percentage points to 104.7 from 95.1 in 2007, representing the industry’s highest combined ratio since it posted a 107.2 in 2002.
• The mortgage and financial guaranty segments significantly influenced the overall industry’s underwriting performance in 2008; as the two segments collectively reported an underwriting loss of $15.1 billion and a combined ratio of 305.0.

• Volatile financial markets pulled the industry’s net investment gains down 47% to $34.1 billion in 2008 from $64.6 billion in 2007.
• The U.S. P/C industry’s policyholders’ surplus declined $59.4 billion, or 11.3%, to $465.4 billion in 2008 from $524.8 billion in 2007.
• The personal lines segment’s underwriting results deteriorated significantly in 2008, with a reported calendar-year combined ratio of 103.9, compared with 96.2 in 2007.
• The commercial lines segment’s combined ratio deteriorated 12.1 percentage points to 106.1 in 2008, driven in part by extensive underwriting losses for mortgage and financial guaranty insurers.
• The U.S reinsurance segment’s combined ratio increased to 99.9 in 2008, up 6.3 points from 93.6 in 2007.
• While the road ahead is full of uncertainty, and 2009 is expected to be another challenging year for the U.S. property/casualty industry, A.M. Best believes the overall industry is sufficiently capitalized to absorb the challenges posed by the cyclical nature of underwriting and the volatility in the financial markets.

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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.