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Property Insurers' Report Card: A Grade Above Last Year

The property-casualty insurance sector, which covers homes, businesses and cars, graded itself about a C+ for the first nine months of this year in a report by the Insurance Information Institute. This category includes some of the nation's biggest companies, such as Allstate, Farmers and Travelers, and, to a certain extent, The Hartford and American International Group's Chartis.
Property casualty insurers' net income rose to $16.2 billion through the end of September, which looks a lot better than the nine-month period a year ago when the recession was just getting a grip on the nation. It shows that P-C insurers, with their vast resources and stringent regulations, weathered the storm much better than many economic sectors, including banks which were overleveraged in mortgages.

But the $16.2 billion looks paltry compared to the $49.6 billion in earnings for the same 2007 period, when the booming economy reached a high-water mark that insurers would once again like to attain.

Losses on underwriting fell $16.6 billion to $3.2 billion in the 2009 period, which helped make these insurers look good. Could this be a sign of genius? Probably not. As Floridians can attest, hurricanes hardly happened this year and one powerful storm can wipe out a lot of profit. The institute notes that insurers are still paying off some of the losses from last year's Hurricane Ike, which caused about $24 billion in damages, mostly in Lousiana and Texas.
The combined ratio improved to 100.7 percent during the period in 2009, from 105.5 percent. That's good, but not good enough. The combined ratio represents losses and expenses to every premium dollar the industry takes in, which means that they are still more than the premiums. In past years, insurers could count on investment income to tide them over. But investment income fell 6.3 percent as interest rates became almost negligible.

Net written premiums, the industry's lifeblood, declined 4.5 percent, not surprisingly right in line with seasonally-adjusted private sector employment and wages. If by chance this should rebound, hopefully, so will insurance.

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