Best and Worst Q3 Results for P&C Markets

It was the best of times. It was the worst of times.
It was none other than the Q3 results of 2009.

The much-anticipated MSA/Baron Outlook Report, released this week, showed an industry that spanned the economic spectrum—from troubling losses in personal lines to startling profits in commercial markets.

The industries losses were prompted by what Joel Baker, president of MSA, called the “three horseman” of personal lines: Ontario auto, property losses and investment losses. 

“Personal and multi-lines insurers experienced an underwriting loss of over $1.1 billion (CDN) as at Sept. 30, 2009.” Though a significant loss in and of itself, Baker notes that this was also “a significant deterioration from the underwriting loss of $313 million they had at the same time last year.”

As a result, personal and multi-lines insurers posted a 106.4% combined ratio (COR) at the end of nine months in 2009, up from the 101.8% COR they posted after the first nine months of 2008.

Baker cautioned, however, that not all personal lines carriers were suffering. “Some are clearly exhibiting strain,” but the “picture of personal lines writers is far from uniform.”

As in all good tales, there was a silver lining. The P&C industry's silver lining was in the commercial lines sector. “Results for commercial writers are showing improvement with a nine-month combined ratio for this group in the low 90s,” wrote Baker.

According to Q3 results, commercial insurers in Canada showed an underwriting income profit of $409.1 million (CDN) after the first three months of 2009. (These results exclude: Insurance Corporation of B.C. (ICBC), Manitoba Public Insurance (MPI), SAF, Lloyd's, most Autorité des marchés financiers (AMF)-regulated insurers and some other provincial writers.) This was a significant increase over the $168.6 million underwriting profit these carriers had made during the first three months of 2008. 

Baker acknowledged that some commercial writers were challenged by “deteriorating property results,” but this was “due more to economic reasons and fire rather than weather.” As such, Baker said that “casualty results remained in check as claims frequency and severity trends remained subdued for the most part.”

Still, pricing in commercial lines appears to be an issue, particularly given that the oft-predicted hard market has not appeared. Baker alludes to the continued pressure of the soft commercial market by simply writing: “Pricing, on the other hand, has yet to firm as competition remains very intense.”