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P/C Insurers Strong Profits Marred by Softening

The U.S. property/casualty insurance industry's net income after taxes rose 10.7 percent to $32.6 billion in first-half 2007 from $29.4 billion in first-half 2006. Fueled...
October 2, 2007

The U.S. property/casualty insurance industry's net income after taxes rose 10.7 percent to $32.6 billion in first-half 2007 from $29.4 billion in first-half 2006. Fueled by the industry's net income, policyholders' surplus - insurers' net worth measured according to Statutory Accounting Principles - increased $26.5 billion to $512.8 billion at June 30, 2007, from $486.2 billion at year-end 2006. 

But the insurance industry's overall profitability as measured by its annualized rate of return on average policyholders' surplus (or statutory net worth) slipped to 13.1 percent in first-half 2007 from 13.5 percent in first-half 2006 as underwriting results deteriorated.  Net gains on underwriting fell 4.1 percent to $14.4 billion in first-half 2007 from $15 billion in first-half 2006. The combined ratio - a key measure of losses and other underwriting expenses per dollar of premium - worsened to 92.7 percent in the first half of this year from 92 percent in the first half of 2006.

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