http://www.businessinsurance.com/cgi-bin/news.pl?newsId=14886
Business Insurance
Hard market will arrive next year: Advisen >
By Sally RobertsDec. 30, 2008>
Underwriting losses and anemic investment returns are putting pressure on rates, and absent a major catastrophe, insurance buyers should expect to start paying more for their commercial insurance beginning in the fourth quarter of 2009 or first quarter of 2010, according to a report released Tuesday by Advisen Ltd.
And while the global recession may delay the onset of the hard market by keeping insurance demand down, once that market sets in, it's likely to last longer than normal, David K. Bradford, New York-based Advisen's executive vp and chief knowledge officer, said in a statement. >
"In previous hard markets, price increases attracted new capital investment to the market, and the increase in insurance supply led to short hard market cycles," Mr. Bradford said. "In the current economic environment, where credit markets are essentially frozen, capital to create new insurance and reinsurance capacity may be in short supply." >
Advisen notes in its report that embattled insurance giant American International Group Inc. should not be singled out for driving rates down and prolonging soft market conditions, despite assertions to the contrary by some of AIG's competitors—assertions AIG has denied.>
According to an Advisen poll of 17 commercial lines brokers, AIG "appears to be competing vigorously, but not irresponsibly," Advisen said. One polled broker, Advisen noted, said that "some insurers are so obsessed with winning AIG customers that they, not AIG, are more responsible for cutthroat competition." >
As the hard market settles in, not every line of business will increase in price at the same pace, according to Advisen. The reinsurance market, for example, will firm up sooner than the overall primary market and will place upward pressure on heavily reinsured lines such as excess casualty. >
Property insurance pricing, on the other hand, will remain soft through 2009, with premiums in some catastrophe-prone areas continuing to fall into 2010 absent major losses, Advisen predicts. >
Premiums have already increased for financial institution directors and officers and errors and omissions liability coverages as a result of the subprime mortgage meltdown and ensuing credit crisis, Advisen said. And workers compensation premiums, which have largely stabilized as a result of reforms in several large states in 2005 and 2006, are likely to begin to edge higher by mid-2009. >
Copies of the full report can be obtained by e-mailing info@advisen.com.
***********************************************************************
This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
Showing posts with label casualty. Show all posts
Showing posts with label casualty. Show all posts
Tuesday, December 30, 2008
Wednesday, December 17, 2008
Commercial Insurance Prices Dropped 4% in Q3, Reports Towers Perrin
http://www.insurancejournal.com/news/national/2008/12/17/96390.htm
Insurance Journal
National News
Commercial Insurance Prices Dropped 4% in Q3, Reports Towers Perrin
December 17, 2008
Commercial insurance prices dropped four percent during the third quarter of 2008 compared to the same quarter a year ago, according to Tower Perrin's most recent commercial lines insurance pricingand profitability trends (CLIPS) survey.>
This deterioration, while less severe than the five percent drop seen in the second quarter of 2008, comes at the front end of the decline in the financial markets, and the full effect of the current global economic downturn on commercial prices has not yet been captured. >
Property pricing softened considerably, while price changes in specialty lines remained fairly flat for the second consecutive quarter, according to the survey.>
Updated loss ratio indications from the survey show accident year 2007 loss ratios deteriorating 11 percent relative to 2006, and the partial indication for accident year 2008 shows a 10 percent decline.>
"The overall deterioration in pricing is a continuation of the trend citedwhen we published our first survey almost four years ago," said Jeanne Hollister, Towers Perrin managing principal and Property/Casualty Insurance practice leader for the Americas region. "We do, however, expect to see abatement in soft market conditions in the U.S., as companies consider a number of factors in their pricing decisions, including equity and credit-related losses to asset portfolios, a continuation of poor underwriting results in many sectors, heavy weather-related losses and a forecasted spike in directors and officers liability claims.>
"In our view, the industry is fast approaching a point where the underwriting results are no longer favorable relative to economic hurdle rates, and that generally signals a 'tipping point' in terms of companies' pricing actions," added Hollister.>
Towers Perrin said that CLIPS data are based on both new and renewal business obtained directly from carriers underwriting the business, and indicate more conservative price reductions than other marketplace surveys.>
CLIPS participants include the majority of both the top 10 commercial lines companies and the top 25 insurance groups in the U.S. >
Source: Towers Perrinwww.towersperrin.com
Find this article at:
http://www.insurancejournal.com/news/national/2008/12/17/96390.htm
***********************************************************************
This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
Insurance Journal
National News
Commercial Insurance Prices Dropped 4% in Q3, Reports Towers Perrin
December 17, 2008
Commercial insurance prices dropped four percent during the third quarter of 2008 compared to the same quarter a year ago, according to Tower Perrin's most recent commercial lines insurance pricingand profitability trends (CLIPS) survey.>
This deterioration, while less severe than the five percent drop seen in the second quarter of 2008, comes at the front end of the decline in the financial markets, and the full effect of the current global economic downturn on commercial prices has not yet been captured. >
Property pricing softened considerably, while price changes in specialty lines remained fairly flat for the second consecutive quarter, according to the survey.>
Updated loss ratio indications from the survey show accident year 2007 loss ratios deteriorating 11 percent relative to 2006, and the partial indication for accident year 2008 shows a 10 percent decline.>
"The overall deterioration in pricing is a continuation of the trend citedwhen we published our first survey almost four years ago," said Jeanne Hollister, Towers Perrin managing principal and Property/Casualty Insurance practice leader for the Americas region. "We do, however, expect to see abatement in soft market conditions in the U.S., as companies consider a number of factors in their pricing decisions, including equity and credit-related losses to asset portfolios, a continuation of poor underwriting results in many sectors, heavy weather-related losses and a forecasted spike in directors and officers liability claims.>
"In our view, the industry is fast approaching a point where the underwriting results are no longer favorable relative to economic hurdle rates, and that generally signals a 'tipping point' in terms of companies' pricing actions," added Hollister.>
Towers Perrin said that CLIPS data are based on both new and renewal business obtained directly from carriers underwriting the business, and indicate more conservative price reductions than other marketplace surveys.>
CLIPS participants include the majority of both the top 10 commercial lines companies and the top 25 insurance groups in the U.S. >
Source: Towers Perrinwww.towersperrin.com
Find this article at:
http://www.insurancejournal.com/news/national/2008/12/17/96390.htm
***********************************************************************
This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.
Monday, December 1, 2008
Insurance Mergers: Many Buys, Scarce Financing
CFO.com 11/25/2008
http://www.cfo.com/printable/article.cfm/12673889
Insurance Mergers: Many Buys, Scarce Financing
The only place to raise capital to make hay out of the bargains that AIG and other insurers are dishing up is the stock market, an M&A expert says.David M. Katz, CFO.com USNovember 25, 2008
It's a commonly held truth about free-market capitalism that its potential to destroy some companies creates opportunities for others. While that may be true in the current financial crisis, the credit crunch has made it tough for the survivors to make hay out of such failures.
That may well be the case in the insurance industry, where the massive collapse of American International Group has forced the giant insurer to try to dump many of its still valuable corporate assets onto the trading block at bargain-basement prices. But because the sources of financing have just about dried up in the downturn, only companies with the heftiest balance sheets and the rare ability to raise capital by issuing stock are in a position to be taking advantage of the sale of assets by AIG and other insurers, says David Schieldrop, a managing director with Barclays Capital.
Speaking on mergers and acquisitions yesterday during an Ernst & Young webcast on the credit crisis and the global insurance industry, he said that in there's "an unprecedented number of properties coming to market while valuations are under sever stress." That represents "a once in a generation opportunity to obtain" high-quality insurance companies on the cheap, he said.
The price-to-earnings ratios and market capitalization of some of the nation's most prominent insurance carriers have dropped precipitously over the last year, according to numbers Schieldrop provided from Factset, a provider of financial information. For example, estimated p/e ratio and market cap for the Hartford fell from 9.9 to 0.8 and from $33 billion to $0.8 billion, respectively, between June 1, 2007 and November 20 of this year. The Prudential (12.5 to 1.9 and $47 billion to $6 billion), the Principal Financial Group (14.1 to 2.5 and $16 billion to $2 billion), and Allstate have taken similar falls (8.9 to 3.4 and $38 billion to $10 billion).
But the big story in the industry, noted the Barclay's merger specialist, is AIG. In October, the company's chief executive, Ed Liddy, outlined plans to sell off chunks of the company to help pay back the $85 billion or so it has borrowed from the Fed, while holding onto AIG's domestic property-casualty insurance operations and retaining a stake in its foreign life insurance companies. Liddy said then that he hopes to sell off AIG's U.S. life insurance, annuity, and pension businesses to a single buyer, while divesting part of its non-U.S. life insurance operations.
No deals have been announced yet. But Reuters reported earlier this month that AIG is expected by the end of the year to reach deals to sell its U.S. personal lines business unit and Hartford Steam Boiler Inspection and Insurance Co.
In addition to AIG, many insurance companies will likely have units on the block either to raise money or to shed non-core assets, according to Schieldrop. But because of the low valuations, "there's a lot less incentive to sell unless you really need to," he said. "So the activity you'll see over the next six to nine months [will involve] AIG and other distressed situations."
At the same time, it's become tough for potential buyers to find financing for such deals in the current capital markets, according the Barclay's executive. Buyers of investment grade debt and convertibles have fled, he noted.
But it's still possible to raise acquisition money by issuing common stock, albeit at hefty discounts, according to Schieldrop. "The equity market is the only market available to finance these transactions," he noted.
Article&AdTagId=EXCLUDE&Action=Print&Rubric=Mergers and Acquisitions&Author=David M. Katz&Date=November 25, 2008&Title=Insurance Mergers: Many Buys, Scarce Financing&PageNumber=1&Source=CFO.com US&id=12673889' + tracking_attrib; }
© CFO Publishing Corporation 2008. All rights reserved.
http://www.cfo.com/printable/article.cfm/12673889
Insurance Mergers: Many Buys, Scarce Financing
The only place to raise capital to make hay out of the bargains that AIG and other insurers are dishing up is the stock market, an M&A expert says.David M. Katz, CFO.com USNovember 25, 2008
It's a commonly held truth about free-market capitalism that its potential to destroy some companies creates opportunities for others. While that may be true in the current financial crisis, the credit crunch has made it tough for the survivors to make hay out of such failures.
That may well be the case in the insurance industry, where the massive collapse of American International Group has forced the giant insurer to try to dump many of its still valuable corporate assets onto the trading block at bargain-basement prices. But because the sources of financing have just about dried up in the downturn, only companies with the heftiest balance sheets and the rare ability to raise capital by issuing stock are in a position to be taking advantage of the sale of assets by AIG and other insurers, says David Schieldrop, a managing director with Barclays Capital.
Speaking on mergers and acquisitions yesterday during an Ernst & Young webcast on the credit crisis and the global insurance industry, he said that in there's "an unprecedented number of properties coming to market while valuations are under sever stress." That represents "a once in a generation opportunity to obtain" high-quality insurance companies on the cheap, he said.
The price-to-earnings ratios and market capitalization of some of the nation's most prominent insurance carriers have dropped precipitously over the last year, according to numbers Schieldrop provided from Factset, a provider of financial information. For example, estimated p/e ratio and market cap for the Hartford fell from 9.9 to 0.8 and from $33 billion to $0.8 billion, respectively, between June 1, 2007 and November 20 of this year. The Prudential (12.5 to 1.9 and $47 billion to $6 billion), the Principal Financial Group (14.1 to 2.5 and $16 billion to $2 billion), and Allstate have taken similar falls (8.9 to 3.4 and $38 billion to $10 billion).
But the big story in the industry, noted the Barclay's merger specialist, is AIG. In October, the company's chief executive, Ed Liddy, outlined plans to sell off chunks of the company to help pay back the $85 billion or so it has borrowed from the Fed, while holding onto AIG's domestic property-casualty insurance operations and retaining a stake in its foreign life insurance companies. Liddy said then that he hopes to sell off AIG's U.S. life insurance, annuity, and pension businesses to a single buyer, while divesting part of its non-U.S. life insurance operations.
No deals have been announced yet. But Reuters reported earlier this month that AIG is expected by the end of the year to reach deals to sell its U.S. personal lines business unit and Hartford Steam Boiler Inspection and Insurance Co.
In addition to AIG, many insurance companies will likely have units on the block either to raise money or to shed non-core assets, according to Schieldrop. But because of the low valuations, "there's a lot less incentive to sell unless you really need to," he said. "So the activity you'll see over the next six to nine months [will involve] AIG and other distressed situations."
At the same time, it's become tough for potential buyers to find financing for such deals in the current capital markets, according the Barclay's executive. Buyers of investment grade debt and convertibles have fled, he noted.
But it's still possible to raise acquisition money by issuing common stock, albeit at hefty discounts, according to Schieldrop. "The equity market is the only market available to finance these transactions," he noted.
Article&AdTagId=EXCLUDE&Action=Print&Rubric=Mergers and Acquisitions&Author=David M. Katz&Date=November 25, 2008&Title=Insurance Mergers: Many Buys, Scarce Financing&PageNumber=1&Source=CFO.com US&id=12673889' + tracking_attrib; }
© CFO Publishing Corporation 2008. All rights reserved.
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