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Catastrophes hit property/casualty income, rates stabilizing: Moody's

Posted On: Nov. 23, 2011 12:00 AM CST

Catastrophes hit property/casualty income, rates stabilizing: Moody's

Commercial insurance rates continued to show signs of stabilization and “modest improvement” in the third quarter of the year, according to an analysis by Moody's Investors Service.

In its analysis, “U.S. P&C Insurers' 3Q11 Earnings Down Significantly; Pricing Continues to Stabilize,” New York-based Moody's said Tuesday that net income for publicly traded property/casualty companies dropped to $1.6 billion in the third quarter of the year compared with $5.4 billion during the same period last year.

The drop was due largely to catastrophe losses, Moody's said. “While Hurricane Irene was not a capital or credit event” for the industry in the third quarter, it still weakened year-to-date income that already was under pressure from winter storm and tornado losses in the first half of the year, Moody's said.

Moody's said the “recent stabilization of pricing and relatively benign loss costs should help stem deterioration in future underwriting performance as the premiums are earned.”

Pricing rise expected

But the rating agency also said insurers “face head winds” from weak underwriting margins thus far this year, low investment returns and slow economic growth. Those factors along with insurers' hurricane loss expectations as “a result of catastrophe model revisions will shape insurers' perception of catastrophe risk and available capital,” said Moody's. “We believe that, collectively, these factors should help fuel further pricing improvement for the (property/casualty) sector.”