Weiss Ratings: P-C Firms Lost $738 Million

NU Online News Service, March 25, 11:53 a.m.EST?Impacted by a slumping stock market and terrorismclaims, property-casualty insurers in the first nine months of 2001experienced a $738 million net loss, compared with a $19 billionprofit for the same period in 2000, according to Weiss RatingsInc.

Weiss, based in Palm Beach Gardens, Fla., said the loss isprimarily due to the estimated damages from the Sept. 11 attacks,which caused reported claims to jump $23.5 billion to $171.8billion through the third quarter of 2001, as compared to $148.3billion during the same period the prior year.

The second factor Weiss researchers found was the stock marketslump, which caused the industry to suffer a $6.6 billion, or 49percent, decline in realized capital gains.

"Fortunately, more than a decade of profits helped somecompanies build up the capital they'll need to avoid insolvencydespite the massive 9/11 claims," said Martin D. Weiss, chairman ofWeiss Ratings, Inc. "But other companies are likely to be moreseverely impacted by the tragedy, especially those in the businessof writing workers' comp insurance."

Indeed, workers' comp could become the industry's mostvulnerable line of business, according to Weiss. The rating agencysaid that although the long-term effects of Sept. 11 might not beknown for years, insurers with 50 percent or more of their businessin workers' comp recorded a $1.7 billion loss for the first ninemonths of 2001, compared to a $161 million loss for the same periodin 2000.

"Workers' comp insurance was already a weak line of business forthe industry even before the attacks,'' continued Mr. Weiss. "Now,large, anticipated losses, including those from emotional traumaand stress claims over the coming months and years, will deal theindustry a tough blow. As a result, policyholders can expect futurerate increases, restrictions on claims, and even someinsolvencies.''

Among the 2,159 p-c insurers reviewed by Weiss using thirdquarter 2001 data, only nine were upgraded, while eighty-four weredowngraded. Weiss listed as "notable upgrades":

? Builders Insurance Company, from "E" to "C."

? Kentucky Employers Mutual Insurance Company, from "D" to"C."

? Medmarc Mutual Insurance Company, from "C-plus" to"B-minus."

Its "notable downgrades" were given as:

? Erie Insurance Exchange, from "A" to "B-plus."

? State Farm Fire & Casualty Company, from "A-minus" to"B-plus."

? State Farm Mutual Auto Insurance Company, from "A-plus" to"A."

The Weiss Safety Ratings are based on an analysis of a company'srisk-adjusted capital, reserve adequacy, profitability, liquidityand stability. The stability category combines a series of factors,including asset growth, premium growth, strength of affiliatecompanies, and risk diversification.

Weiss describes itself as the only major rating agency thatreceives no compensation from the companies it rates.

Weiss also listed and rated companies experiencing the largestlosses for the first nine months of 2001, as follows:

? State Farm Fire and Casualty Company, $1.155.3 billion loss,"B-plus."

? General Reinsurance Corp., $1.098.2 billion loss, "B."

? State Farm Mutual Auto Insurance Company, $1,076.9 billionloss, "A."

? Continental Casualty Company, $986.9 million loss, "C."

? American Reinsurance Company, $688.8 million loss, "C."

? State Farm Lloyds, Inc., Texas, $570.5 million loss, "B."

? Firemans Fund Insurance Company, $435.0 million loss,"C-plus."

? Farmers Insurance Exchange, $357.6 million loss, "C-plus."

? Erie Insurance Exchange, $317.3 million loss, "B-plus."

? Swiss Reinsurance America Corp., $286.6 million loss, "C."

? OneBeacon Insurance Company, $279.4 million loss,"C-plus."

? Allianz Insurance Company, $223.3 million loss, "B-minus."