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JERSEY CITY, N.J., April 10 —
By the end of the year 2008 it was disclosed that for the complete year of 2008 financial results indicate that private U.S. property/casualty insurers held the sum of $455.6 billion in policyholders’ surplus (creating to statutory net worth). In addition to this, insurance companies are reporting a loss of $555.6 billion in loss and loss adjustment expense reserves set aside for covering the expense of settling past claims and an additional $200.8 billion in unearned premium reserves that has been established and in order to cover losses that may occur during the remaining policy term in effect at year-end 2008. This then brings the total available funds for covering losses and additional contingencies to something over $1.2 trillion. The premiums-to-surplus ratio and other key leverage ratios, indicate that the property/casualty insurance industry is still well capitalized. This is in spite of the fact that policyholders’ surplus dropped down at year-end 2007to $62.3 billion, or 12 percent, from a high of $517.9 billion.

In addition to all of this, data show that the property and casualty insurers have stayed profitable during all of 2008, during which time they earned $2.4 billion in net income. But as catastrophe losses, the emerging recession, as well as the financial system crisis grew, insurers’ profits and profitability took a toll with respect to underwriting and investment results. Net after tax income last year for the property and casualty insurance industry’s $2.4 billion was a drop of $60.1 billion, which amounts to 96.2 percent of the $62.5 billion of 2007. The average policyholders’ surplus for the industry on rate of return, dropped to 0.5 percent in 2008 from 12.4 percent in 2007, reflecting the decline in net income.

In 2008, insurers suffered $21.2 billion in net losses on underwriting, which contributed to the declines in insurers’ net income and overall rate of return. This represents a $40.5 billion reverse swing after insurers’ $19.3 billion in net gains in 2007. This combined ratio represents a major measure of losses and other underwriting expenses as reported per dollar of premium. According to ISO and the Property Casualty Insurers Association of America (PCI), this index deteriorated down to 105.1 percent last year from 95.5 percent in the previous year of 2007.
The combined sum of net investment income together with realized capital gains (or losses) on investments Insurers’ net investment gains continued to drop in 2008 by a figure of 50.9 percent to $31.4 billion. This is compared to the figure for 2007 of $64 billion.
Miscellaneous and other income rose $0.9 billion to negative $0.1 billion in 2008 from negative $1 billion in 2007, which acts to partially offset the deterioration in underwriting and investment results. At the same time however, insurers’ and insurers’ federal income taxes declined to $7.7 billion from $19.8 billion which also acts as a partial offset to losses.

The figures being presented represent consolidated estimates for all private U.S. property and casualty insurers and are derived from reports that account for at least 96 percent of all business being currently written by such insurers.