U.S. P-C Results Down In First-Half 2008, Says Best

Deteriorating underwriting results and declining investment returns led to a decline of more than 50 percent in the U.S. property-casualty industry’s net income for the first half of 2008, according to A.M. Best.

In a special report released yesterday, Oldwick, N.J.-based Best said the U.S. p-c net income was at $15.9 billion for the first half of the year. For the 12 months ended June 30, Best said annualized after-tax return on equity fell to 9.5 percent, down from 14.2 percent for the 12 months ended June 30, 2007.

First-half 2008 net written premiums dropped by $1.6 billion, or 0.7 percent, to $224.3 billion compared to 2007.

The industry’s first-half 2008 combined ratio was 102.1, due to price softening, catastrophe losses, and underwriting losses by mortgage and financial guaranty insurers, according to Best.

Best reported the combined ratio at 102.5 for personal lines and 102.2 for commercial lines. For the U.S. reinsurance segment, the first-half 2008 combined ratio jumped to 97, up from a first-half 2007 combined ratio of 90.3.

Investment results were hurt by “the low interest rate environment, ongoing turmoil in the credit markets, and extreme volatility in the equity markets,” Best said.

Regarding expectations for the rest of the year, Best said it “expects the industry’s performance measures to be pressured through the second half of 2008, given the sustained competitive pressures in practically all lines of business and geographic areas, continued volatility in the financial markets, and the expectation of further hurricane activity in the Atlantic basin.