The latest data from the property and casualty industry shows flat to down pricing in most lines of insurance, and a further decline in net written premiums, continuing a three-year trend for the industry. If these declines continue, the industry will soon match a record set during the Great Depression.

IN PICTURES: 6 Tips On Selling Your Home In A Down Market

The Survey Says
A recent survey by Tower Watson indicates that pricing for commercial insurance was flat on a year-over-year basis during the first quarter of 2010. The company surveys 37 insurance companies and estimates that these respondents cover 20% of the commercial insurance market.

Another survey by MarketScout shows that the composite rate for property and casualty fell 3% in May 2010. The surveyed reported that rates in every line of insurance fell during the month, with the deepest declines in the commercial property and general liability lines.

The property and casualty industry also saw a 1.3% decline in net written premiums in the first quarter of 2010 over the same quarter in 2009. Net written premiums also declined in 2007, 2008 and 2009, and with the first quarter of 2010, they have now started their fourth consecutive year of declines.

The industry last saw four straight years of declining net written premiums from 1930 to 1933, and a comparison to the Great Depression is never a good thing for any industry.

These surveys don't mean that the industry is in bad shape. The Insurance Information Institute (III) reported that the property and casualty industry earned an annualized statutory rate of return on average surplus of 6.7% in the first quarter of 2010. The industry also reported net income of $8.9 billion during the first quarter of 2010. The industry lost $1.3 billion in the same quarter in 2009.

Company Commentary
Travelers (NYSE:TRV) was able to show growth in net written premiums in the first quarter of 2010. The company reported net written premiums of $5.25 billion in the quarter, up 1% from the first quarter of 2009.

The Hartford Financial Services Group (NYSE:HIG) reported $2.5 billion in net written premiums in the first quarter of 2010, flat on a year-over-year basis. The company cited growth in small and middle market new business, offset by "economy-driven exposure reductions across the commercial segments."

The management of Ace Limited (NYSE:ACE) commented on pricing during the first quarter of 2010 earnings conference call. Evan Greenberg, the CEO of Ace Limited, said "pricing for the business we wrote in the quarter was down about 1.25% in North America. In general, pricing on new business was worse than on renewals by about 3%."

CNA Financial (NYSE:CNA) reported a first quarter of 2010 decline in net written premiums for the company's specialty and commercial insurance segments. CNA Financial reported net written premiums of $1.485 billion in the quarter, down from $1.592 billion in the same quarter of 2009.

Bottom Line
Things certainly could be worse for the property and casualty industry as the industry at least reported a profit in the first quarter of 2010. Unfortunately, businesses continue to reduce coverage to cope with the anemic growth of the recovery, and the industry is about to match a record on premiums last seen during the Great Depression. (To learn more, check out The Industry Handbook: The Insurance Industry.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing

    Build a Retirement Portfolio for a Different World

    When it comes to retirement rules of thumb, the financial industry is experiencing new guidelines and the new rules for navigating retirement.
  2. Investing Basics

    Understanding Brokerage Fees

    Agents charge brokerage fees for facilitating transactions between buyers and sellers.
  3. Investing

    Redefining the Stop-Loss

    Using Stop-losses for trading doesn’t mean ‘losing money’, but instead think about the money you'll start saving once you learn how they work.
  4. Fundamental Analysis

    10 Major Companies Tied to the Apple Supply Chain

    Apple has one of the best supply-chain models. Here are some of the top businesses involved, and the benefits and challenges for all.
  5. Investing News

    Canada in Recession

    On September 1, 2015, Statistics Canada reported that the economy has contracted by 0.5% in Q2 2015, after falling 0.8% in previous quarter.
  6. Term

    What are Non-GAAP Earnings?

    Non-GAAP earnings are a company’s earnings that are not reported according to Generally Accepted Accounting Principles.
  7. Mutual Funds & ETFs

    ETF Analysis: PowerShares FTSE RAFI US 1000

    Find out about the PowerShares FTSE RAFI U.S. 1000 ETF, and explore detailed analysis of the fund that invests in undervalued stocks.
  8. Options & Futures

    Use Options to Hedge Against Iron Ore Downslide

    Using iron ore options is a way to take advantage of a current downslide in iron ore prices, whether for producers or traders.
  9. Economics

    Is a Recession Coming?

    In the space of a week, the VIX Index, a measure of market volatility, spiked from 13, suggesting extreme complacency, to over 50, evidencing total panic.
  10. Stock Analysis

    Fortinet: A Great Play on Cybersecurity

    Discover how a healthy product mix, large-business deal growth and the boom of the cybersecurity industry are all driving Fortinet profits.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  3. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  4. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  5. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  6. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!