WEISS RATINGS

Property and Casualty Insurers Increase Claims Reserves
by $22 Billion in 2002
Industry Posts $13 Billion Profit

PALM BEACH GARDENS, Fla., July 1, 2003 - The nation's property and casualty insurers increased reserves for prior-year paid and unpaid claims by $22.1 billion in 2002, on top of an $11.7 billion increase in 2001, according to Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks. The increase, which represents the largest reserve adjustment made by property and casualty insurers since Weiss began analyzing the industry, reflects the companies' failure to adequately estimate losses.

reserve

"Instead of setting aside reserves based on conservative actuarial estimates, insurers in the 90s were under-reserving in an attempt to boost profits," said Melissa Gannon, vice president of Weiss Ratings, Inc. "Now it's come back to haunt them, effectively driving up premiums for today's policyholders."

Insurers recording the largest reserve adjustments for 2002 include:

Company Headquarters Weiss
Safety
Rating
2002
Reserve
Adjustment
($Mil)
2001
Reserve
Adjustment
($Mil)

American Re-Insurance Princeton, N.J. C- 2,220.8 874.8
Employers Reinsurance Overland Park, Kan. C+ 1,883.4 350.1
Columbia Ins. Omaha, Neb. B- 1,115.8 26.9
National Union Fire Ins. of Pittsburgh New York, N.Y. B+ 1,011.2 218.7
Travelers Casualty & Surety Hartford, Conn. B- 992.5 34.9
Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak

Majority of Industry's Business Lines Under-reserved

In reviewing property and casualty insurers by each line of business, Weiss found that the majority of business lines required additional funding for loss reserves, while just four - products liability-claims made, international, reinsurance A1, and auto physical damage — maintained adequate or excess reserves in 2002. The lines of business requiring the largest addition to reserves in 2002 were:

Line of Business 2002
Adjustment to
Reserves
($Mil)
2001
Adjustment to
Reserves
($Mil)
Reinsurance B2 5,184.2 2,665.3
Other Liability - Occurrence3 5,157.0 855.8
Products Liability — Occurrence 3,218.1 1,693.2
Workers' Compensation 2,250.4 2,038.2
Commercial Multi Peril 1,492.9 945.1
Homeowners/Farmowners 1,285.8 1,046.6
Commercial Auto Liability/Medical 1,074.2 1,614.1

"Much of these increases are the result of asbestos lawsuits, losses from September 11, and the after-effects of the soft insurance market," continued Ms. Gannon.

Industry Posts $13 Billion Profit

Property and casualty insurers earned a profit of $13.3 billion in 2002, compared to a $3.4 billion loss in 2001. Improved underwriting results contributed to the industry's profitability, as insurers cut their underwriting loss to $28.3 billion in 2002, compared to a $49.6 billion loss in 2001. This underwriting loss was then compensated for through insurers' $43.1 billion in investment income, which was up slightly from the $40.7 billion recorded in 2001.

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 insurance companies, banks, and brokerage firms. Weiss also rates the risk-adjusted performance of more than 12,000 mutual funds and more than 7,000 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 www.WeissRatings.com, or starting at $15 by calling 800-289-9222.


1 Reinsurance A is non-proportional assumed reinsurance property, a special type of reinsurance for property coverage.
2 Reinsurance B is non-proportional assumed reinsurance liability, a special type of reinsurance for liability coverage.
3 Other liability includes asbestos, environmental, errors and omissions, contractual, liquor liability, etc.


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