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Good news? P/C profit falls 96 percent

By John Sullivan

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It isn’t sexy, but who cares? A bright spot in an otherwise ailing insurance industry — property/casualty.

“Compared with life insurers and many other financial-services companies, shares of insurance firms that cover property damage and legal liability have weathered the market downturn well,” writes Liam Pleven in the Wall Street Journal.

Of course, he then immediately notes that the industry’s profit fell 96 percent last year, and it would have lost money overall if insurers hadn’t released billions of dollars from overpayments to its reserve requirements. Reserve releases, common in the industry, reflect an insurer’s judgment that it had set aside more to pay claims than it now expects to need.

Reserve releases will be much smaller this year, meaning P/C companies won’t be able to maintain the same level of stability. And of course, if we get whacked with another Katrina, things will fall apart rather quickly. But for now, even though it’s a trend section, we’ll take it one day at a time.