Magazine article American Banker

Life Insurer Woe Seen; P/C Firms Wield Pricing Power

Magazine article American Banker

Life Insurer Woe Seen; P/C Firms Wield Pricing Power

Article excerpt

Insurance industry analysts say the life industry is facing problems but that property/casualty companies are imposing price increases that bolster their results.

Alice D. Schroeder, a managing director at Morgan Stanley, said she does not expect the property/casualty market to soften any time soon, despite some evidence that prices in personal lines have stabilized. Last year was very profitable for the short-term lines such as auto and homeowners, and the companies that sell these products now have more capital to deploy into new products, driving competition, she said.

But the factors that drove a pricing downturn in the 1990s -- like high investment returns -- have not recurred, she said.

And commercial lines remain in need of bigger price increases, the analysts said, especially in areas like workers' compensation.

"Casualty is still a mess," said John Gillespie, the deputy chairman of White Mountains Insurance Group, which is based in Bermuda. The strong results in 2002 for many companies, he said, leave enough room so that "2003 should be an improved year" for the p/c market overall. However, he said, "for workers' comp, I think 2003 is another loser."

Mr. Gillespie and Ms. Schroeder spoke Tuesday as part of a panel at the Standard & Poor's Insurance 2003 Seminar, along with Colin Devine, a managing director at Citigroup's Salomon Smith Barney, and David Schiff, the editor-writer of Schiff's Insurance Observer.

The group expressed concerns about the life insurance industry, which is facing poor investment performance, a squeeze from low interest rates, and pressure from the ratings agencies.

Meanwhile, the analysts also noted that several life insurers have taken charges related to the liabilities incurred with some guarantees on life and annuity products. …

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