GAINS DOWN FOR P/C INSURERS

Property and casualty insurers suffered a staggering $6.6 billion decline in investment gains during the first six months of 2002, to $18.1 billion from $24.7 billion during the same period in 2001, according to Weiss Ratings Inc. Driving the decline was a $5.8 billion reduction in capital gains, from a $5.4 billion gain in the first half of 2001 to a $475 million capital loss during the same period in 2002. Weiss noted that unlike life and health insurers, property and casualty insurers typically do not profit from their core underwriting business but rather rely on investment income and capital gains to cover those losses and then some. The decline in capital gains from June 30, 2001 to June 30, 2002 represents a severe reduction in a primary source of income for the industry. For the first six months of 2001, capital gains represented 142 percent of the industry’s overall profits. However, for the same period in 2002, there were no capital gains to contribute to profits. Buoyed by rising premiums, underwriting losses improved by $6.9 billion to help offset the decline in investment income. Consequently, insurers enjoyed a 42.1 percent increase in earnings, from $3.8 billion in the first six months of 2001 to $5.4 billion for the same period in 2002.