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By DAN REYNOLDS, senior editor of Risk & Insurance®

Two sizable global insurers, one a mutual, one publicly traded, reported substantially improved third quarters over prior years in results released in late October.

Boston-based Liberty Mutual, which houses personal auto and life insurance lines along with its commercial property/casualty business, reported net income for the third quarter of $265 million. That's a lot better than the $6 million in net income that the carrier reported in the third quarter of 2008.

It also reflects two factors that are aiding property/casualty insurers as 2009 winds down. Catastrophe losses, particularly hurricane CAT losses, have been light or nonexistent, and investment income, though being held down by low interest rates from banks, is tending to be flat and not in free fall as it had been through much of 2008.

Even so, Ted Kelly, Liberty Mutual's chairman, CEO and president, took a dim view of the immediate future of many in the broader commercial property/casualty market. As he has previously, he compared many carriers in the commercial property/casualty to either drunks or insane people for the prices they are charging for their insurance as this soft commercial market pedals on and on.

"I made a remark--I think it was the last quarter--that the industry is like an alcoholic, swearing off drink until it gets to the next saloon. And it does appear that the commercial markets have strolled into the saloon and will soon be staggering out," Kelly told analysts, his tight Irish brogue adding even more color to the analogy.

Kelly said, in business that he views as unprofitable and where his company is trying to raise rates, it is losing business to competitors that he views as being less than prudent in their pricing.

"We have several accounts that are what we call in loss position, and when we try to raise rates, they are taken over by competitors at expiring rates which are well below adequate," Kelly said.

Kelly said that his company has substantially reduced its exposures in the workers' compensation market in California, and he implied that the workers' compensation market in Florida is heading toward ruination.

"Clearly the regulators in Florida are hell-bent on doing to the workers' comp system what they did to the homeowners' market," Kelly said. "Rates are down a total of 60 percent over the last couple of years."

ACE NOT IN THE HOLE

The head of one of Kelly's publicly traded competitors, ACE Ltd's chairman and CEO Evan Greenberg, had similarly bright results to report.

Zurich-based ACE reported substantially higher net income in 3Q 2009, $494 million, compared with the $54 million in net income it reported in the third quarter of 2008. That's an increase of 814 percent for those of you keeping score at home.

Greenberg said conditions lately have been even more competitive than they were at the end of the summer.

"Overall pricing on the business we wrote, new and renewal, was up more than 2 percent for the quarter globally," Greenberg said.

"Pricing was better for the business we wrote in July than in September," he added.

Greenberg wasn't as frank about it as Kelly was, but he also referred to "irrational" competitors taking business away from ACE in some lines.

ACE's property/casualty combined ratio was 88.1 percent in the third quarter of 2009, which compares quite favorably with the 97.9 percent P/C ratio the company had in the third quarter of 2008.

Aiding that percentage were reported catastrophe losses on the part of ACE of $45 million in the quarter, compared with $411 million in the previous year.

ACE reported essentially flat net written premiums in the quarter, and Greenberg said he expects that figure to improve in the fourth quarter as the weakened dollar erases the impact of foreign exchange losses.

November 2, 2009

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