Marginal Growth Predicted

After two years of double digit earnings, industry CEOs and analysts expect only marginal growth in 2008. They point to growing price competition as a restraint on profits. Even so, the outlook remains favorable.

The "Early Bird" survey of analysts, conducted by the Insurance Information Institute (I.I.I.) predicted that when the 2007 numbers are finally counted, the property/casualty industry will report net income of between $60 and $65 billion, about the same as 2006. For 2008, the analysts expect the combined ratio to rise to 97.3 from 93.8 in 2007. If the combined ratios in 2007 and 2008 come in under 100, as expected, they would produce just the third and fourth underwriting profits in the property/casualty industry since 1978.

Predictions of marginal growth in 2008 were voiced by CEOs from some of the largest companies at the January industry conference in New York sponsored by I.I.I. Commenting on 2007, Ramani Ayer, CEO of The Hartford, pointed out that even at 13 percent, industry profit margins in 2007 were still under the Fortune 500 average of 14 percent. "It was a terrific year, but if you go back to 1990 or 1950, you really are looking at two good years over a period of anemic years. It's not a large return over a longer period of time," he asserted.