Wednesday, December 28, 2011

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 3rd quarter, 2011.  While there have been no real dramatic changes from the end of the 2nd quarter, that in and of itself is noteworthy.  That is because the 3rd 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

Friday, December 9, 2011

3rd Quarter (2011) Cash Flow

These graphics present cash flow for U.S. Property & Casualty Insurers updated through the end of 3rd 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 1st and 2nd 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 3rd 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