News Column

Fitch Updates U.S. Property/Casualty Industry Statutory Results and 2014 Forecast

June 20, 2014



CHICAGO--(BUSINESS WIRE)-- Link to Fitch Ratings' Report: U.S. Property/Casualty Industry Statutory Results and Forecast (2014 Profit Deterioration Anticipated)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=750357

In a new Special Report, Fitch Ratings updates its forecast for U.S. property/casualty insurance industry statutory operating performance in 2014 and 2015.

The industry reported its best underwriting results since 2007 with a combined ratio of 96.2% in 2013. This strong underwriting performance sparked a sharp improvement in industry profitability for 2013. Statutory operating earnings surged 80% resulting in an 8.5% operating return on surplus. The net income return on surplus, which includes realized investment gains, was 11.4%.

Industry aggregate policyholders' surplus grew by 12% in 2013 to a record high of $665 billion. Record earnings combined with all-time high unrealized investment gains driven by favorable equity market performance were the key elements behind this increase.

For 2014, Fitch is forecasting a second consecutive year of underwriting profits with a modest increase in the combined ratio to 97.3%. Core loss ratio improvement from recent renewal premium rate increases are likely to be offset by a reversion of catastrophe related losses toward historical levels and moderation in the level of favorable reserve development. Weaker underwriting profits and flat investment income levels lead to a projected industry return on surplus of 7.4% in 2014.

The latest indications are that levels of renewal rate increases are slowing, reversing a several year trend of meaningful renewal rate increases across most lines of business. Fitch anticipates rates will move toward flat levels in the latter portions of 2014 tied to competition intensifying as market underwriting capacity expands. The industry forecast for 2015 is for a slight underwriting profit and further declines in operating profits.

The full report including the updated forecast for 2014 and 2015 can be found on Fitch Ratings website, 'www.fitchratings.com' under the title 'U.S. Property/Casualty Industry Statutory Results and Forecast.'

Additional information is available at 'www.fitchratings.com'.

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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

James B. Auden, CFA, +1 312-368-3146

Managing Director

Fitch Ratings, Inc.

70 West Madison Street

Chicago, IL 60602

or

Gerald B. Glombicki, CPA, +1 312-606-2354

Director

or

Jeremy R. Graczyk, +1 312-368-3208

Analyst

or

Media Relations:

Brian Bertsch, +1 212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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