US Policyholder Surplus vs Combined Ratio at 2011 3Q

The graphic below updates the basic data for the U.S. P & C Industry through the end of the 3^rd quarter, 2011.  While there have been no real dramatic changes from the end of the 2^nd quarter, that in and of itself is noteworthy.  That is because the 3^rd quarter is often a time of healing for the industry but this year that didn’t happen.  Most indicators have deteriorated a bit or remained about the same which is a direct reflection of the large amount of catastrophe losses of the last several months, the fact that investment returns continue at a reduced level and that reserve releases continue to drop from prior periods.  On the positive side premium growth has been positive, up 3.1% for the first 9 months of the year. Policyholders surplus has dropped some $20.5 billion, the combined ratio has remained about steady at 109.9% and while the premium to surplus ratio remains well below 1 to 1 at 0.8 to 1, that’s up from 0.78 to 1 as of June 30.  Will be most interesting to see what the yearend figures will look like.

- Jerry Sullivan

3rd Quarter (2011) Cash Flow

These graphics present cash flow for U.S. Property & Casualty Insurers updated through the end of 3^rd quarter, 2011.  Very interesting results.  Operations have generated a positive cash flow a bit below the quarterly average for the last 11 months, which is an improvement from the 1^st and 2^nd quarters of this year.  Investments turned in a massive negative cash flow, almost 3 times the average of the last 11 quarters while cash from Financing dropped to a negative figure some 30% worse than the average of the last 11 quarters. 

Thus net cash flow for the industry for the quarter, the really important measure to watch, dropped to a negative figure almost 8 times greater than the average for the last 11 quarters.  For this entire period of time (2009 through 3^rd quarter 2011) the industry has had a negative cash flow of almost $25.5 billion of which $16.5 billion occurred this last quarter.  This will add significant pressure to change the market’s direction. 

- Jerry Sullivan

Brady Kelley's Comments on NAPSLO

Quarterly Commercial Rates Up for 1st Time Since 2003

This graphic speaks for itself and presents the results of the 3^rd quarter 2011, Council of Insurance Agents & Brokers rate survey.  It’s clear a market turn has begun and all insurance producers should think seriously about managing expectations of their client base by advising them of the impact of such a turn.  It is still early days and how quickly and how far this change will go is presently unknown.  However, it’s clear a turn has begun.  This is the result of years of under pricing of commercial insurance products, sustained low investment income, reduction of excess claim reserves, all exacerbated by significant U.S. and worldwide catastrophe losses that have occurred over the last 18 months.

- Jerry Sullivan 

U.S. Property & Casualty Industry Cash Flow

These graphics present both detailed and net quarterly cash flow data for U.S. Property & Casualty insurers as of June 30, 2011.  Operations have suffered from the impact of the many catastrophes (tornadoes, floods and wild fires) experienced during the first half of the year contributing only $1.3 billion in the 2^nd quarter.  Investments provided almost $2.7 billion in the 2^nd quarter but is expected to turn negative in 3^rd quarter reflecting the recent difficult investment markets.  Financing activities drained cash of nearly $5.8 billion in the 2^nd quarter including dividends to stockholders of almost $5.4 billion. 

Thus the net cash flow as of the 2^nd quarter was a negative $1.8 billion.  More importantly is that the industry has experienced negative cash flow in 6 of the last 10 quarters, a sure indication that the market is about to turn.

When does Business go to Lloyd’s, and Why?

Jerry Sullivan, the head of the Sullivan Group, sat down with Charles Boyle of Insurance Journal to talk a bit about Lloyd’s of London, and what kind of business is best placed there and why.

Kentucky Proposal for Allocation of Surplus Line Tax

Here is a NAPSLO link to the Kentucky proposal for allocating taxes.  NAPSLO, AAMGA, CIAB, CIWA and a number of other industry organizations have come out in support of this proposal.  SLIMPACT has signaled its intention to utilize this approach.

Kentucky Surplus Line Tax Allocation Proposal

One of the key measures of financial health in the insurance industry is cash flow. Whenever the industry goes into negative cash flow it is either in or is going into a tight market. Here are two graphics that present the annual cash flow for the U.S. Property & Casualty Insurance Industry for the last seven years.

The first graphic presents cash flow separately for Operations, Investments and Financing. Interesting to note that cash flow from Operations has been deteriorating over this time period and that Investments have not produced a positive cash during these seven years.

The second graphic presents the net cash flow position of the industry for the same period of time and note that the industry has had negative cash flow for three of the last four years. Will be most interesting to see what the cash flow position of the industry will be for the first six months of 2011 which will be presented here when available.

Catastrophes, Premiums, and the Cycle

In this interview with insurance Journal’s Charlie Boyle, Jerry Sullivan, head of the Sullivan Group, speaks out on some insurance industry essentials concerning catastrophes, premiums and the Cycle.

How Natural Catastrophes Impact the Reinsurance Industry

In this interview with Insurance Journal’s Charles Boyle, Jerry Sullivan, head of the Sullivan Group, explains how and why natural disasters have an impact on the (re)insurance industry, that goes beyond individual catastrophes as major losses, which have continued to increase, affect premiums and capital flows.

U.S. Thunderstorm Losses

Industry Observations

The spate of thunderstorms in the mid-West and South in April and May were unprecedented and the results are beginning to show in insurance company 2nd quarter earnings statements.

See the graphic below.

Insurance Industry Observations

Industry Observations -- U.S. Property & Casualty Commercial Rates

Based on the most recent quarterly report from the Council of Insurance Agents & Brokers, U.S. Commercial P & C insurance rates decreased a mere 0.1% in 2nd quarter 2011, the best showing since the 1st quarter of 2004. Is the market turning? See the graph below.

How New NRRA Regulations and California’s AB315 Will Change the Surplus Lines Industry

Jerry Sullivan, the head of the Sullivan Group, gives his views, largely positive, on how the Dodd-Frank NRRA regulations will require changes in the way the surplus lines industry operates, in this interview with Insurance Journal’s Charles Boyle.

Introduction

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