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

    Retirees: 7 Lessons from 2008 for the Next Crisis

    When the last big market crisis hit, many retirees ran to the sidelines. Next time, there are better ways to manage your portfolio.
  2. Economics

    Industries That Thrive On Recession

    Recessions are not equally hard on everyone. In fact, there are some industries that even flourish amid the adversity.
  3. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
  4. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  5. Fundamental Analysis

    Is a U.S. Industrial Recession on the Horizon in 2016?

    Find out why the industrial economy may be teetering on an industrial recession and what could prevent it from going over the cliff.
  6. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  7. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  8. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  9. Fundamental Analysis

    Gloom and Doom for Global Markets in 2016?

    Learn about the volatility in global markets during the beginning of 2016. See why famous investors are saying some economies could see recessions.
  10. Stock Analysis

    The Top 5 Micro Cap Alternative Energy Stocks for 2016 (AMSC, SLTD)

    Follow a cautious approach when purchasing micro-cap stocks in the alternative energy sector. Learn about five alternative energy micro-caps worth considering.
RELATED FAQS
  1. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  2. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  3. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  4. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  5. What is the formula for calculating the current ratio?

    The current ratio is a financial ratio that investors and analysts use to examine the liquidity of a company and its ability ... Read Full Answer >>
  6. What is the formula for calculating earnings per share (EPS)?

    Earnings per share (EPS) is the portion of a company’s profit that is allocated to each outstanding share of common stock, ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center