Steven D. Schwartz, CFA
352 262 3940
The Insurance Services Office released its 2Q09 property/casualty industry results [in late September]. Property/casualty (P&C) net income increased 28.1 percent year over year to $7.1 billion. Net catastrophe losses declined to $4.8 billion in 2Q09 from $7.1 billion in 2Q08.
Underwriting performance improved to a 99.5 percent combined ratio from 104.1 percent in 2Q08. Net investment income declined 9.2 percent year over year to $11.9 billion.
There was a $21.6 billion year over year positive swing in unrealized capital gains on investments as the financial markets recovered. The industry’s annualized return on average surplus rose to 6.3 percent in 2Q09 compared to 4.3 percent in 2Q08.
On September 24, Bloomberg reported that U.S. life insurers were requesting loosened standards tied to souring residential mortgage investments from state regulators. As capital requirements surge, the carriers holding requirement against the slumping assets grew fivefold to $11 billion in the first half of 2009, according to the American Council of Life Insurers (ACLI.) A hearing is planned to assess the regulator’s use of the rating firms.
On September 9, a report entitled The Value of Life in Tough Economic Times was issued by Prudential Financial, Inc. (PRU). The study found that even though 70 percent of people surveyed have cut back on routine expenditures, 93 percent of consumers surveyed consider life insurance a ‘must’. The majority indicated that they find life insurance costs minimal in comparison with other items in their budgets.
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AXA Group: AXA posted solid first-half results with underlying earnings of EUR 2.1bn, beating consensus of EUR 1.8bn and our forecast of EUR 1.9bn. The balance sheet was also solid with solvency rising to 133 percent from 127 percent, and NAV growing by 4 percent. The earnings strength mainly comes from a significant turnaround in the U.S., as expected, highlighting that AXA has largely resolved the challenges facing its variable annuity hedging program.