Many Solid Returns

Investment returns and underwriting results improve for property/casualty insurance companies, but catastrophes are taking their toll and will also do so in the first quarter of 2011.

By DAN REYNOLDS, senior editor of Risk & Insurance®

Major players in the commercial insurance space reported satisfying fourth-quarter and year-end 2010 results buoyed by stronger equity markets and portions of the U.S. and global economies in varying stages of recovery.

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Nowhere was news of an economic turnaround more welcome than at Hartford, Conn.-based The Hartford Financial Services Group Inc., which reported $1.68 billion in net income in 2010, compared with an $887 million loss in 2009.

The turnaround was also due to a stronger investment portfolio and an improving small business sector.

"Obviously, from all perspectives, this is a significant turnaround from 2009," said The Hartford's President, Chairman and CEO Liam McGee during an earnings call with analysts on Feb. 3.

As of Dec. 31, 2010, The Hartford's investment portfolio had a net loss of $600 million, compared with the $5 billion loss it showed in the year-ago period.

It's in the small business portion of the U.S. economy where The Hartford is writing more business. The company's property/casualty written premium was up 4 percent over the prior-year quarter, driven mainly by small commercial, the company reported.

"Overall, we are seeing early signs of economic improvement, particularly in small business," McGee said.

Fourth-quarter combined ratio in its property/casualty operations was 95 percent, up from a combined ratio of 89.8 percent in the year-ago period, the company also reported.

ACE Ltd. reported $1.001 billion in fourth-quarter net income, a 5 percent increase over the company's $953 million in the year-ago period.

"This is the first quarter in our history that we earned more than $1 billion in net income," Chairman and CEO Evan Greenberg told analysts and investors. For the year, the company reported net income of $3.10 billion, up 22 percent compared to the year-ago period.

ACE's combined ratio for the fourth quarter of 2010 was 90.3 percent, a slight erosion from the company's combined ratio of 89.6 percent in the fourth quarter of 2009. Included in that 2010 combined ratio were catastrophe losses that Greenberg described as triple those in 2009.

Warren, N.J.-based Chubb Corp. reported a fourth-quarter combined ratio of 87 percent, up from 84.7 percent in the year-ago period. Net income of $2.2 billion for 2010 was flat compared to the year-ago period.

St. Paul, Minn.-based The Travelers Companies Inc. reported $3.21 billion in net income in 2010, down from $3.62 billion in net income in 2009. Like other carriers, it reported increasing catastrophe losses. Travelers reported $729 million in after-tax catastrophe losses in 2010 compared with $279 million in CAT losses in 2009.

Chubb reported 5.7 points of its combined ratio being attributable to CAT losses in 2010, compared with less than a point in 2009.

ACE is estimating losses from Australia flooding at between $75 million and $90 million. Chubb is forecasting losses due to the Australian flooding at between $75 million to $100 million before taxes.

February 8, 2011

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