Slew of Major Carriers Report Strong Profitability in Quarter

Big-name carriers--AIG, Zurich, CNA, Hartford--report higher 1Q numbers as disciplined underwriting and diversification help them absorb CAT losses.

By CYRIL TUOHY, managing editor of Risk & Insurance®

Major commercial-lines insurance carriers posted strong first-quarter earnings based on the strength of their underwriting results and the diversification of their investment portfolios, according to company earnings releases.

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A series of catastrophes, which earlier this year gave rise to questions about how the companies' bottom lines in the first quarter would fare, barely seemed to make a dent.

"While the first quarter saw significant catastrophe losses industrywide, they were not a major event for CNA," said Thomas F. Motamed, chairman and CEO of Chicago-based CNA Financial Corp.

CNA reported net income of $245 million in the quarter, up from a loss of $195 million in the year-ago period. Core property/casualty operations improved $45 million.

The Hartford, which revamped its decades-old sales and product structure and repaid government bailout loans, reported net income of $319 million compared with a loss of $1.2 billion in the year-ago period.

Better investment returns and strong underwriting results helped The Hartford turn in a strong quarter, said Chairman, President and CEO Liam E. McGee, in a statement.

Catastrophe losses of $79 million in the first quarter were "in line with expectations," McGee said.

Zurich Financial Services Group's first-quarter net income shot up 76 percent to $935 million, compared with the year-ago period, the company reported.

The company was able to protect its margins in light of the "significant impact" from the Chilean earthquake, storms in Europe and the slow economy, CEO Martin Senn said in a statement.

Zurich's Farmers Insurance unit reported profits of $462 million, a 43 percent increase over the year-ago period. Fees and other related revenue rose 13 percent to $703 million, the company said.

CHARTIS AND AIG

AIG reported first-quarter net income of $1.45 billion, compared with a loss of $4.35 billion in the year-ago period, the company announced on Friday, May 7.

Write-downs on securities narrowed to $309 million in the first quarter from about $3.7 billion a year earlier, Bloomberg reported, citing company filings. Investment income jumped to $384 million compared with a loss of about $1 billion in the year-ago period, Bloomberg also reported.

AIG's insurance operations--Chartis, SunAmerica Financial Group, AIG Star and AIG Edison--generated $2.2 billion in pretax operating earnings, up from $908 million in the year-ago period, the company also reported.

The increase in AIG's insurance operations came courtesy of strong investment results, even as Chartis suffered losses of about $481 million due to the Chile earthquake.

The results of AIG's insurance operations also prompted AIG President and CEO Robert H. Benmosche to say in a statement that AIG's overall financial position had now stabilized.

AIG had suffered massive losses over the past 18 months related to insuring subprime mortgages that went bad, and the company almost went under before it was bailed out with U.S. government help.

The company, Benmosche added, intends to repay the loans extended to it by the U.S. Treasury and the Federal Reserve Bank of New York through the sale of AIG assets.

The sale of American International Assurance Co. and American Life Insurance Co., Benmoshe added, should be completed by the end of the year.

May 11, 2010

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