The US property/casualty industry reported dramatically improved operating results for both the fourth quarter and full year of 2003 when compared with the same periods in 2002, claimed a study from AM Best.
In addition, it said the industry reported a “sorely needed jolt to the bottom line”, as total surplus rose sharply by an estimated 22.2% during 2003, propelled by strong underwriting results and a noticeable upturn on Wall Street.
It said the 9% annual percentage change in net premium writings represented a deceleration in premium increases from the reported full calendar year 2002. “This is hardly good news for insurers in several market segments, given how poorly accident years 1997-2001 were priced, which is evidenced by the adverse loss-reserve development attributed to these accident years,” said the ratings agency.
Although the reported accident-year 2002 combined ratio showed favourable development in 2003, AM Best said it believed that some of this would reverse out as the accident year more fully matured, with some insurers being overly optimistic in booking 2003 reported accident-year picks.
The ratings agency said some of its data showed increases in net premiums written scaled back to approximately 4.3% and 9% in the fourth quarter and the full year 2003, respectively.
“Nonetheless, the benefits of multiple renewal premium and the adherence to more stringent underwriting standards resulted in the industry reporting a combined ratio of 100.1% for 2003, an improvement of nearly 7.3 points from the full-year 2002 reported calendar-year combined ratio of 107.4%,” it said.
AM Best said the industry's strong financial performance was being driven by significantly improved underwriting results, as underwriting losses for the full year 2003 of approximately $4.8bn represented a reduction of nearly 85% from the figures for 2002.
