The property/casualty industry continued to build on the operating momentum achieved during 2003, with a reported underwriting gain during the first quarter of 2004, said AM Best.
It said very strong operating results and favourable equity-market conditions boosted the industry's surplus beyond the record levels achieved at the end of 2003.
AM Best said the biggest challenge facing the market would be will be to maintain market discipline in light of flattening premium rates and increased surplus levels.
In addition to this problem, the trend of premium growth from rate increases continued to decelerate, said the company, as net written premiums increased at a significantly lower level compared with the first quarter of 2003.
But AM Best said the combined ratio combined to improve despite these challenges. The ratio improved from 99.7% in 2003 to 93.3% for 2004.
It said this signified the most profitable quarterly underwriting period for five years.
Total favourable loss-reserve development reported at nearly $1.8bn, relatively moderate catastrophe losses, and persisting impacts of rate increases that are fully earning through insurers' income statements all propelled underwriting results, said the ratings agency.
“While there are indications that rates are softening in certain segments such as commercial property and personal automobile business lines, the benefits of tighter underwriting terms and conditions continue to be key drivers in the industry's strong underwriting results,” warned AM Best
“Market dynamics, such as competitors' withdrawals during the past several years, along with varying economic factors, continue to fuel the demand for capacity in certain market segments.
“Nonetheless, murmurs of competitive forces are emerging within the US property/casualty market.”
The report, “First Quarter P/C Results Build On Last Year's Profit Momentum”, is available from AM Best.
