CHICAGO--(BUSINESS WIRE)--Link to Fitch Ratings' Report: Statutory Performance Rankings -- U.S.
Fitch Ratings has published a new report that examines statutory financial performance for the U.S. property/casualty insurance industry and 35 of the largest market participants over a 5-year period 2009 - 2013.
Fitch's report analyzes companies and the industry versus five unique measures that consider: underwriting performance, net profit margin, cash flow, return on capital, and internal capital formation. Companies are ranked by each operating ratio and in addition, an aggregate weighting of the ratios provides a comprehensive ranking of operating performance.
The market underwriting cycle has changed materially during the last five years. Specifically, the period began with soft market conditions in 2009 - 2011 before heavy catastrophe losses in 2011 and 2012 promoted a general improvement in pricing. Finally, in 2013, the industry reported its first underwriting profit since 2007.
The results for the latest five years (2009?2013) now exclude the underwriting and investment losses and decline in capital reported amidst the financial turmoil of 2008. Recovery of investment markets has been a key element behind growth in surplus over the last five years, favoring companies with higher allocations to common equities and alternative assets.
Rating analyses benefits from a comparison of longer term performance for an individual insurer versus the industry. The most successful underwriters tend to report solid results above peer averages in any market conditions. American Financial Group, Inc., Chubb Group of Insurance Companies, Progressive Corporation, Travelers Companies, Inc. and Berkshire Hathaway's National Indemnity Corporation reported the strongest performance over the period similar to their position in Fitch Rating's past studies
The relationship between ratings and five-year performance rank appears to be much stronger for stock companies versus mutual and reciprocal insurers. Higher rated non-stock insurers tend to maintain strong capital positions with little or no outstanding debt obligations. Mutual and reciprocal insurers are also likely to have lower return on capital objectives versus stock companies. Although Fitch expects continued profitability during 2014, shifts from lower tier performers to top tier performers are infrequent.
The report 'Long-Run Statutory Operating Performance Rankings' is available on the Fitch web site at 'www.fitchratings.com.'
Additional information is available at 'www.fitchratings.com'.