Moody’s says US P&C insurers ‘solid’

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6 September 2010

US property and casualty (P&C) insurers took a hit on catastrophe losses but maintained solid capital strength, Moody’s Investors Service says in its latest industry analysis.

Hailstorms, tornadoes and floods in the American Midwest and south constrained results, but were offset by continuing positive reserve development.

The results, generally in line with expectations, reflected a slow economy and strong competition in the P&C market. Net written premiums were flat compared to last year, with some companies showing modest reductions and others positive growth.

Insurers’ equity capital was boosted by an average of 5% in the first half, which Moody’s put down to rebounding investments and net income, offset by ongoing share buybacks which were up fivefold on a year ago.

The increasing share purchases reflected continued profitability, improved capital positions and limited growth in a slowly recovering economy.

Investment losses were down from the highs of the last two years, Moody’s analyst Bruce Ballentine said. “The majority of P&C carriers do not have sizable exposures to problematic asset classes such as real estate investments, where risks remain elevated,” he said.

Margins in the second half are expected to be under pressure from the soft pricing environment, lower investment yields and swings in catastrophes and reserve development.

Moody’s also says the European market’s results show insurers will be challenged to increase profitability for the remainder of the year.

“European P&C insurers’ results will remain challenging over the near term due to generally flat combined rations for primary insurers in the first half of this year and deteriorating results for reinsurers following unusually heavy natural catastrophe losses.”