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P/C Profit Outlook Strong For 2006 Weakening In 2007/2008, Conning Predicts

The property/casualty industry will turn in underwriting profits for 2006 equal to 2004, but results are expected to decline in the next two years, according to the latest forecast from Conning Research and Consulting, Inc.
"Analysis of 2005 results for the industry shows a remarkable consistency in profitability by line of business, aside from the effects of catastrophes," said Stephan Christiansen, Director of Research at the Hartford-based consulting firm. "Profitability continues through 2006, but slowing premium growth, rising loss costs, and accumulating surplus will take their toll, and the industry will again show combined ratios above 100 percent in 2007 and 2008."
"Our study identifies several conditions that are clouding our 2006-2008 forecasts," said Christiansen. "Market conditions are becoming more price-competitive outside of catastrophe-prone areas, but with some volatility. This is stimulated by surplus accumulation, strong loss reserves, and strong cash flow. The projection also reflects an expectation for heightened catastrophe losses, but below the levels seen in 2004 and 2005. Increased pricing for coastal exposures and higher costs and reduced availability of reinsurance are helping to moderate these premium trends through 2008. Overall, we expect ROEs will slowly subside, falling from 9.2 percent in 2005 to 7 percent by 2008."
The report, "Property Casualty Forecast & Analysis by Line of Insurance, 2005-2008" is available for purchase on a quarterly subscription basis from Conning Research & Development, Inc. by calling 888-707-1177 or by visiting the Company's web site at www.conningresearch.com.