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

3 comments:

  1. The investment hit doesn't make any sense. Was the industry forced to take losses they'd been carrying or is there something else afoot?

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  2. A valid observation, which I questioned as well. After several quarters in which funds from the sale of securities exceeded funds used to purchase securities, in the third quarter purchases significantly exceed sales - i.e., more cash went into investments than came out. Tough to know exactly why? Insurers were sitting on the sidelines, holding investment cash, earlier in the year but saw third quarter as a good time to invest? Perhaps they'd been holding cash for possible losses but then invested it when operations showed a profit for the quarter? We are looking into it and will comment more if some answers become clear.

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