WEISS RATINGSProfits of Property & Casualty Insurers Plunge
From $19 Billion to a $738 Million Loss
|Terrorist Attacks Drive Up Claims By $23.5 Billion|
Palm Beach Gardens, Fla., March 25, 2002 - The nation's property and casualty insurers lost $738 million during the first nine months of 2001, compared to a $19 billion profit during the same period in 2000, according to research conducted by Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds and stocks.
The loss is the industry's first since Weiss began rating property and casualty insurers in 1993, and is primarily due to two factors. First, the estimated damages from the September 11 attacks caused reported claims to surge $23.5 billion to $171.8 billion through the third quarter of 2001, as compared to $148.3 billion during the same period the prior year. Secondly, the stock market slump caused the industry to suffer a $6.6 billion, or 49 percent, decline in realized capital gains.
Source: Weiss Ratings, Inc. Net income = premium income less claims and administrative
expenses, plus investment income, realized capital gains, and other income.
Companies experiencing the largest losses for the first nine months of 2001 include:
|State Farm Fire and Casualty Co||Ill.||1,155.3||B+|
|General Reinsurance Corp||Del.||1,098.2||B|
|State Farm Mutual Auto Ins Co||Ill.||1,076.9||A|
|Continental Casualty Co||Ill.||986.9||C|
|American Reinsurance Co||Del.||688.8||C|
|State Farm Lloyds Inc||Texas||570.5||B|
|Firemans Fund Insurance Co||Calif.||435.0||C+|
|Farmers Insurance Exchange||Calif.||357.6||C+|
|Erie Insurance Exchange||Pa.||317.3||B+|
|Swiss Reinsurance America Corp||N.Y.||286.6||C|
|OneBeacon Ins Co||Pa.||279.4||C+|
|Allianz Insurance Company||Calif.||223.3||B-|
"Fortunately, more than a decade of profits helped some companies build up the capital they'll need to avoid insolvency despite the massive 9/11 claims," said Martin D. Weiss, Ph.D., chairman of Weiss Ratings, Inc. "But other companies are likely to be more severely impacted by the tragedy, especially those in the business of writing workers' comp insurance."
Workers' compensation insurance, which covers medical treatment, rehabilitation costs, lost-wage replacements, funeral expenses and death benefits, could become the industry's most vulnerable line of business, as claims are estimated to reach billions of dollars. Although the long-term effects of such a disaster may not be known for years, workers' comp insurers recorded a $1.7 billion loss for the first nine months of 2001, compared to a $161 million loss for the same period in 2000.1
"Workers' comp insurance was already a weak line of business for the industry even before the attacks," continued Dr. Weiss. "Now, large, anticipated losses, including those from emotional trauma and stress claims over the coming months and years, will deal the industry a tough blow. As a result, policyholders can expect future rate increases, restrictions on claims, and even some insolvencies."
Among the 2,159 property and casualty insurers reviewed by Weiss using third quarter 2001 data, only nine were upgraded, while eighty-four were downgraded. Notable upgrades include:
|Builders Insurance Company (Nev.)||from E to C-|
|Kentucky Employers Mutual Insurance Company (Ky.)||from D to C-|
|Medmarc Mutual Insurance Company (Vt.)||from C+ to B-|
Notable downgrades include:
|Erie Insurance Exchange (Pa.)||from A to B+|
|State Farm Fire & Casualty Company (Ill.)||from A- to B+|
|State Farm Mutual Auto Insurance Company (Ill.)||from A+ to A|
The Weiss Safety Ratings are based on an analysis of a company's risk-adjusted capital, reserve adequacy, profitability, liquidity and stability. The latter category combines a series of factors including asset growth, premium growth, strength of affiliate companies and risk diversification.
Weiss issues safety ratings on more than 15,000 financial institutions, including HMOs, life and health insurers, Blue Cross Blue Shield plans, property and casualty insurers, banks and brokers. Weiss also rates the risk-adjusted performance of more than 11,000 mutual funds and more than 9,000 stocks. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses and libraries.
Consumers needing more information on the financial safety of a specific company can purchase a rating and summary analysis for as little as $7.95 through the Weiss Ratings website at www.WeissRatings.com, or starting at $15 by calling 800-289 9222.
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1Weiss defines workers' compensation insurers as those companies with at least 50 percent of their business in workers' compensation. Weiss Ratings tracks 26 property and casualty lines of business. The five largest lines of business are auto, homeowners, multiple peril, workers' compensation, and other liability and commercial multiple peril.