Weiss Ratings

Hurricanes Batter Property and Casualty Insurers
with a $4.2 Billion Underwriting Loss in 2005
Capital and Surplus Growth Slows Dramatically

(Revised April 18, 2006)
JUPITER, Fla., April 17, 2006 — Last year's devastating hurricane season took its toll on the property and casualty industry, walloping insurers with a $4.2 billion underwriting loss in 2005, according to Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks. The loss erased the record underwriting profit of $6.4 billion reported by the industry in 2004.

Property and casualty insurers reporting the largest year-over-year deterioration in underwriting performance were:

Company Headquarters Weiss
Safety
Rating1
Capital &
Surplus
($Mil)
Underwriting Gain (Loss) ($Mil)
4th Qtr
2005
4th Qtr
2004
$
Change
State Farm Mutual Auto Ins. Co. Bloomington, Ill. B+ 50,187.3 (2,295.9) 1,032.2 (3,328.0)
Allstate Ins. Co. Northbrook, Ill. A- 14,833.7 (833.3) 2,464.3 (3,297.6)
National Indemnity Co. Omaha, Neb. B+ 28,720.4 (1,736.8) 949.4 (2,686.2)
Continental Casualty Co. Chicago, Ill. C 6,743.3 (1,619.6) (444.7) (1,174.8)
Employers Reinsurance Corp. Park, Mo. C 5,388.9 (2,121.1) (980.5) (1,140.6)


Solid performance in the equity market and rising interest rates helped compensate for the underwriting loss with property and casualty insurers reporting a 17.2 percent rise in investment income, from $42.4 billion in 2004 to $49.7 billion in 2005. Likewise, capital gains jumped 31.6 percent to $11.7 billion, compared to the $8.9 billion reported one year ago. Consequently, despite the catastrophic losses associated with the most active hurricane season on record, insurers earned $46.7 billion in 2005 and managed a 13 percent profit increase, although the growth was considerably less than the industry reported in 2004 when net income surged 28 percent to $41.3 billion.

Insurers reporting the largest increases in earnings were:

Company Headquarters Weiss
Safety
Rating1
Capital &
Surplus
($Mil)
Net Income (Loss) ($Mil)
4th Qtr
2005
4th Qtr
2004
$
Change
Columbia Ins. Co. Omaha, Neb. B- 8,846.0 4,339.4 500.0 3,839.4
National Fire & Marine Ins. Co. Omaha, NE B 3,592.5 1,979.9 129.8 1,850.1
State Farm Florida Ins. Co. Bloomington, IL C 561.4 26.9 (771.3) 798.2
St. Paul Fire & Marine Ins. Co. St. Paul, MN B- 6,575.9 983.3 190.5 792.8
Zurich American Ins. Co. New York, N.Y. C 5,527.9 (352.1) (1,082.8) 730.7

Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak; F=Failed; U=Unrated

"Property and casualty insurers transferred much of their risk to reinsurers who now bear the burden of the insured losses," said Melissa Gannon, vice president of Weiss Ratings, Inc. "Nonetheless, with more intense hurricane seasons projected, both primary insurers and reinsurers face an uphill battle to improve underwriting performance, leaving many consumers in high-risk areas with little relief from rising premiums."

Industry Capital and Surplus Growth Slows Dramatically

Two consecutive hurricane seasons with staggering losses have dramatically slowed the growth of the industry's capital and surplus, which rose only 3.9 percent to $515 billion as of December 31, 2005 compared to year-end 2004 when insurers registered an 11.9 percent increase.

Property and casualty insurers reporting the largest reduction in capital and surplus were:

Company Headquarters Weiss
Safety
Rating1
Total &
Assets
($Mil)
Capital & Surplus ($Mil)
4th Qtr
2005
4th Qtr
2004
$
Change
Travelers Ins. Co. (Accident Dept) Hartford, Conn. U 68,345.7 4,081.3 7,885.8 (3,804.5)
Allstate Ins. Co. Northbrook, Ill. A- 45,243.5 14,833.7 16,766.7 (1,933.1)
National Union Fire Ins. Co. of Pitt New York, N.Y. B+ 28,267.3 8,047.0 8,554.0 (507.0)
West American Insurance Co. Fairfield, Ind. C 282.2 199.7 484.6 (284.9)
American Re-insurance Co. Princeton, Del. D 17,160.8 3,041.4 3,304.7 (263.3)

Weiss Safety Rating: A=Excellent; B=Good; C=Fair; D=Weak; E=Very Weak; F=Failed; U=Unrated


The Weiss Safety Ratings are based on an analysis of a company's risk-adjusted capital, five-year historical profitability, quality of investments, liquidity, and stability. The latter category combines a series of factors including asset growth, premium growth, strength of affiliate companies and risk diversification.

Weiss Ratings, Inc. reviews more than 8,000 stocks daily, including all those traded on the New York Stock Exchange, the American Stock Exchange, and Nasdaq. Weiss also issues investment ratings on more than 12,000 mutual funds, covering equity, fixed-income, and closed-end funds, and provides financial safety ratings on more than 15,000 financial institutions, including banks and insurance companies. It is the only major rating agency that receives no direct or indirect compensation from the companies it rates. Ratings and analyses are available through www.weissratings.com or by calling 800-289-9222.

 

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Note to Editors: Weiss Ratings now releases its industry analysis prior to its ratings changes. Weiss Safety Ratings based on 12/31/05 data will be available in May at www.WeissRatings.com.

1Weiss Safety Rating based on 9/30/05 data.

 


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