JUPITER, Florida (October 6, 2011) — The nation’s property and casualty insurers reported a $3.4 billion net loss during the second quarter of 2011, according to Weiss Ratings, an independent rating agency of U.S. financial institutions and sovereign debts. The loss compared with an $8.95 billion profit during the same period in 2010 and is the first loss suffered by the industry since the first quarter of 2009.
Notably, the $7.7 billion pre-tax operating loss was larger than the $7 billion pre-tax operating loss recorded after the events of September 11, 2001. Operating losses exclude taxes, dividends, and capital gains, isolating the core business results.
Insurers reporting the largest losses include:
Weiss Ratings Scale: A = Excellent, B = Good, C = Fair, D = Weak, E = Very Weak.
Plus sign = top of grade range; minus sign = bottom of grade range.
Weiss Ratings financial analyst Gavin Magor commented: “Fortunately the largest losses experienced through mid-year have been for insurers that have, for the most part, solid financial strength; however these losses are not good news for anyone. The property and casualty industry suffered enormous losses first from bond insurers, then mortgage insurers as they weathered the real estate crisis. Now the contagion has spread to the insurers that all households rely upon, home and auto companies. It is likely that we will see some insurers come under significant pressure in the coming year, making mergers and failures highly probable.”
The industry has been hit with a historically high number of natural disasters, which are reflected in the increased claims—up $16.5 billion, or nearly 21%, compared with the prior quarter. In addition, since 2007, when recent market volatility began and interest rates started to decline, the industry has suffered a 14.2% decline in investment income, from $56.5 billion in 2007 to $48.5 billion in 2010.
About Weiss Ratings
Weiss Ratings, the nation's leading independent provider of financial strength ratings on banks, credit unions, insurance companies as well as sovereign debt ratings on 49 countries, accepts no payments for its ratings from rated entities. By adhering to its independent business model, Weiss outperformed Standard and Poor's, Moody's, A.M. Best and Duff & Phelps (now Fitch) in warning of future life and health insurance company failures according to a 1994 study by the U.S. Government Accountability Office (GAO), while also outperforming its competitors in identifying the safest insurers, according to its follow-up study using the GAO's research methodology. Similarly, Weiss was the only one to identify, in advance, nearly all major banks that failed or required a federal bailout in the 2008-2009 debt crisis. .