Property/casualty insurer profits to rise in 2012: Fitch

Healthier premium growth and improved underwriting results should boost U.S. property/casualty insurers' profits in 2012, Fitch Ratings Inc.

In its “2012 Outlook: Property/Casualty Insurance” report released Thursday, Fitch assigned the industry a “stable” outlook. The New York-based rating agency said the industry's capital position remains strong and that most insurers have sufficient capital to manage through “significant future adversity.”

The report noted that weak underwriting performance and low rates of return on investment promoted “a sharp decline in 2011 profitability” for the industry. But Fitch said it expects the property/casualty industry's profitability to improve significantly next year.

“Net written premium growth is anticipated to accelerate” because of pricing improvement in both commercial and personal lines business, Fitch said.

The analysis added that core underwriting results should improve and that catastrophe losses should return to average after unusually heavy catastrophe-related losses this year. Still, Fitch projects a 2012 industry combined ratio of 102.7% compared with a forecast combined ratio of 108.1% this year.

Fitch also cautioned that the commercial lines segment of the industry is more likely to shift to a negative outlook in the near term “relative to personal lines given differences in recent results and fundamental pricing trends.”

Fitch also said that a major catastrophe, investment market drop or further underwriting losses could lead it to lower its outlook to negative.

In its 2011 outlook issued last December, Fitch projected that the soft market would continue this year.