CHICAGO--(BUSINESS WIRE)-- An analysis of property/casualty (P&C) insurer GAAP earnings for the first nine months of 2011 reveals a steep decline in earnings and poor returns on capital. Fitch's compilation of GAAP results for a group of 47 insurers highlights the depths to which industry profitability has sunk due to a devastating year for natural catastrophe-related losses and chronic underpricing across nearly all industry product segments.

The aggregate nine-month underwriting combined ratio of these 47 publicly traded property/casualty (re)insurers deteriorated to 105.3% from 96.1% in the prior year. This increase was largely due to $28 billion of incurred losses from natural catastrophes reported by the group, a 146% increase from the prior year. Underwriting results were also marred by weaker current accident year performance and reduced favorable reserve development from prior years.

The group's operating earnings declined by 67% relative to the prior year. Operating return on average equity (ROAE), which excludes realized gains and losses from earnings, fell to 2.2% in the first nine months of 2011 from 7.0% in the prior year. Only three companies in the group reported an annualized operating ROAE above 10% thus far in 2011, while 20 companies have a year-to-date operating loss.

While there are some encouraging signs in the market from recent pricing trends and stronger growth in 2011 written premium volume for (re)insurers, the current anemic profit results reveal that considerably more premium rate improvement is necessary for a return to consistent double-digit returns on equity for the broader P&C sector.

As profitability for the industry declines, variation in performance widens across individual companies. Companies with the worst performance thus far in 2011 include regional insurers and reinsurance companies, while organizations that continue to generate underwriting profits and better returns on capital are specialty personal auto writers and specialty casualty writers that are not exposed to natural catastrophe events.

The full report, "Property/Casualty Insurers' Nine-Month 2011 Financial Results" will be available Nov. 21.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

CONTACT:

Fitch Ratings
Bill Warlick, +1-312-368-3141
Senior Director
Fitch Wire
Fitch, Inc.
70 W. Madison
Chicago, IL 60602
or
James B. Auden, CFA, +1-312-368-3136
Managing Director
Global Insurance
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com

KEYWORDS:   United States  North America  Illinois  New York

INDUSTRY KEYWORDS:   Professional Services  Finance

MEDIA: