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.

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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.)

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