Fitch Ratings: Insurance Insights–June 2011 Edition

Jun 23, 2011

Below is the June 2011 edition of Fitch Ratings’ “Insurance Insights” newsletter:


Insurance Insights


The Insurance Insights newsletter provides a monthly round up of Fitch Ratings’ special reports, industry trends and company research for the insurance markets. For comprehensive coverage of the insurance sector as it’s published, please regularly check the Fitch website for updates.

Featured Reports

Personal Lines Insurance Market Update

The U.S. personal lines insurance market reported an aggregate underwriting loss for the third consecutive year in 2010 with a combined ratio of 102.4%. Although premium growth trends are positive, a return to underwriting profits is not anticipated in 2011 given the level of catastrophe losses to date. A new report from Fitch Ratings examines results and recent trends in the personal auto and homeowners’ line. Individual insurer personal lines performance is also compared as there are considerable differences in results across companies.  View Full Report

Life Insurers’ Commercial Mortgage Loan Performance – Better than Expected 

U.S life insurers’ commercial mortgage loans performed better than expected in terms of realized losses in 2010.  As a percentage of statutory book value, mortgage loan realized losses totaled 0.46% in 2010 and 0.48% in 2009, putting the industry on track to outperform Fitch Ratings’ loss projection on direct mortgage loans of 2.0% for 2009–2011. Insurers are more actively managing mortgage loan portfolios relative to prior commercial real estate downturns in an effort to minimize the impact of troubled mortgages on regulatory capital requirements.  View Full Report

Insurer Interest Rate Scenarios: Uncertainty Today, Likely Beneficial Tomorrow 

Interest rate risk is important for insurers, especially life insurers, given their long-term assets and liabilities as well as products that often have interest-sensitive features. Fitch Ratings believes that gradually rising interest rates will generally be a favorable scenario for insurers. Alternative scenarios of a sharp rise in interest rates or protracted reduction in bond yields could have a significantly detrimental impact on certain insurance firms. In addition, Fitch Ratings notes that current accounting and regulatory frameworks can at times impede transparency and the understanding of interest rate risks.  View Full Report

Title Insurers’ 2010 Risk-Adjusted Capital Adequacy 

This report examines the U.S. title insurance industry’s risk-adjusted capital (RAC) position at year-end 2010.  The 2010 result of 143% is the second consecutive year of improvement in the industry’s RAC ratio, and is the highest in the last four years. However, the ratio is still well below longer term averages. While Fitch Ratings believes that the industry remains adequately capitalized as a whole, capital strength is clearly a concern for specific companies.  View Full Report

Company Research Highlights

Berkshire Hathaway, Inc.
Humana Inc.
Everest Re Group, Ltd.
Fidelity National Financial, Inc.
Markel Corporation
Minnesota Life Insurance Company (A Subsidiary of Securian Financial Group, Inc.)
Teachers Insurance and Annuity Association of America