Friday, September 7, 2012

U.S. Property Casualty Industry Quarterly Cash Flow – 2009 thru 1st Quarter 2012



These two graphics present the P & C Industry’s cash flow picture through the first quarter of this year and show a very interesting picture.  The most important positive is that cash flow from operations has continued to improve since June 2011 which in turn has been offset to some extent by negative cash flow from investment activities.  The improvement in cash flow from operations is a direct reflection of some up-tick in rates generally as well as a significantly better picture as respects catastrophes here in the U.S., at least through the end of the first quarter.  The deterioration from investment activities was offset largely by other financing activities.
Quarterly Cash Flow Graphs as of 8-15-12

Thus the overall cash flow picture as set out in the second graph shows a material improvement since third quarter of last year but the industry still finished the first quarter this year with a modest overall negative cash flow.  It is this improvement in the cash flow picture as well as the very positive increase in policyholder’s surplus ($571 Billion as of March 31, 2012 – a record high) that is responsible for what is only a modest market tightening despite other industry metrics.

- Jerry Sullivan 

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