|Title:||United States property and casualty combined ratios by lines of business for 2010|
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Combined Ratios * by Line of Business, 2010
Number in parenthesis represents the XX-year combined ratio.
Financial Guaranty (XXX.X) XXX.X (a) Mortgage Guaranty(XXX.X) XXX.X (a) Product Liability (XXX.X) XXX.X (a) Other Liability (XXX.X) XXX.X (a) Other Accident & Health (XX.X) XXX.X (a) Group Accident & Health (XX.X) XXX.X (a) Workers' Compensation (XXX.X) XXX.X (a) Private Passenger Auto Liability (XXX.X) XXX.X (a) Credit (XXX.X) XXX.X (a) Farmowners Multiple Peril (XXX.X) XXX.X (a) Ocean Marine (XX.X) XXX.X (a) Commercial Multiple Peril--Liability (XXX.X) XX.X (b) Commercial Multiple Peril--Non-Liability (XX.X) XX.X (b) Homeowners Multiple Peril (XXX.X) XX.X (b) Commercial Auto Physical Damage (XX.X) XX.X (b) Fidelity (XX.X) XX.X (b) Commercial Auto Liability (XX.X) XX.X (b) Private Passenger Auto Physical Damage (XX.X) XX.X (b) Aircraft (XX.X) XX.X (b) Allied Lines (XXX.X) XX.X (b) Inland Marine (XX.X) XX.X (b) Medical Professional Liability (XXX.X) XX.X (b) Fire (XX.X) XX.X (b) Surety (XX.X) XX.X (b) Boiler and Machinery (XX.X) XX.X (b) Burglary and Theft (XX.X) XX.X (b) Credit Accident & Health (XX.X) XX.X (b) Multiple Peril Crop (XX.X) XX.X (b) Federal Flood (XXX.X) XX.X (b) Earthquake (XX.X) XX.X (b)
Source: Best's Aggregates & Averages
(a) ratio is XXX or higher
(b) ratio is below XXX
The insurance industry flows with the cycles of the world around it. In the property/casualty sector (known as "nonlife" outside the United States), one of the industry's main categories, major catastrophic events such as hurricanes, can wipe out whatever gains insurers have made in the years leading up to the event.
Property insurance covers damages or loss of property. As a result, rates can be significantly higher in areas susceptible to perils such as hurricanes. Casualty insurance covers indemnity losses and legal expenses from losses such as bodily injury or damage that the policyholder may cause to others.
Insurance companies set a reserve amount through a prediction of estimated loss costs over a period of time. Unlike property reserves, which are mostly for specific known events, casualty reserves primarily cover unknown events and have to be sufficient to cover events that may unfold well into the future (i.e., medical professional liability, workers' compensation, product liability and environmental-related claims). These "long-tail" lines of business are named so due to the length of time that may elapse before claims are finally settled.
Determining and comparing profitability among property/casualty companies typically is achieved through the combined ratio, which measures the percentage of claims and expenses incurred relative to premiums earned/written. A combined ratio of less than XXX means that the insurer is making an underwriting profit.
Property owned by insurance companies--primarily stocks, bonds, mortgages and real estate. However, companies with combined ratios over XXX still may earn a profit because the ratio does not account for investment income.
Assets by Year
Top U.S, Property/Casualty Insurers Admitted Assets 2010 ($ Billions)
The industry's combined ratio deteriorated to XXX.X in 2010, according to Best's Aggregates & Averages, down approximately two percentage points from the XXX.X recorded the year before. This deterioration largely stemmed from a X.X point increase in the loss and expense (LAE) ratio, primarily attributable to higher catastrophe-related losses and sizable underwriting losses in the commercial lines and mortgage and financial guaranty segments. This was somewhat offset by favorable prior-year loss-reserve development, as prior-year reserve releases shaved X.X percentage points off the 2010 calendar-year combined ratio. Excluding the impact of catasrophe-related losses and underwriting losses from the mortgage and financial guaranty segments, the industry's normalized combined ratio is estimated to be XX.X for 2010, compared with XX.X in 2009.
The sum remaining after all liabilities are deducted from assets--essentially an insurer's net worth.
Property/casualty insurance generally falls into two areas of concentration: personal and commercial lines.
U.S. Property/Casualty--Segment Underwriting Trends * (2009-2010)
Top U.S. Property/Casualty Insurers Policyholders' Surplus 2010 ($ Billions)
Personal insurance is to protect families, individuals and their property, typically homes and vehicles from loss and damage. Auto and homeowners coverage dominates mostly because of legal provisions that mandate coverage be obtained.
The personal lines segment's operating performance in 2010 significantly improved with $XX.X billion of reported net income, compared with $XX.X billion a year earlier. Carriers in the personal lines segment continued to face a number of challenges in 2010, including uncertain macroeconomic conditions, adverse weather-related losses, ongoing expense management issues and a dynamic competitive landscape. Although the segment overall has effectively managed these issues, insurers may face some headwinds. Potential future obstacles are higher loss costs, including medical costs shifting to the automobile line; expense pressures; and pricing trends, given economic conditions. In addition, ongoing challenges of competition, volatility in property lines and the ever-present regulatory environment contribute to uncertainties within the segment.
In addition, the recessionary environment is impacting top-line revenue. Revenue on the auto line has been tempered by consumers foregoing purchases of new cars and reducing the amount of coverage they buy. On the homeowners line, revenue also has been pressured by economic conditions, given increased foreclosures and fewer home sales.
Personal Lines Segment at a Glance
XX XX Months Months Year/Year ...