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Allstate Corp. reported a $923 million loss and the Travelers Cos. posted an 82% dive in profit on $682 million in catastrophe losses. Investments were a driver behind results, or lack thereof.
Insurance executives during conference calls outlined how each company was affected by losses on investments and catastrophic weather events.
General Lament
Thomas J. Wilson, chairman, president and chief executive officer, Allstate Corp.: The details in the third quarter looked a lot like the second quarter, just with more severe weather and an increasingly negative investment market. The financial markets were extremely difficult, with widening credit spreads and lower equity prices.
Jay Fishman, president, CEO, Travelers Cos.: The last several months have been unprecedented in financial market dislocation and its impact on the financial services community broadly. We have seen upheaval at Fannie Mae, Freddie Mac, Lehman Bros., Bear Stearns and AIG. We have seen governments step up and commit trillions of dollars to financial institutions that previously appeared to be pillars of strength.
Cats, Markets Unkind
Wilson: We experienced 35 catastrophic events, including four hurricanes in the third quarter. We've been moving aggressively to reduce our catastrophe exposure. These actions have been good choices since our losses on [hurricanes] Gustav and Ike would have been about twice as without them.
Hardening Soft Market?
Frederick H. Eppinger, president and CEO, Hanover Insurance Corp.: The pricing cycle puts significant pressure on weaker companies and just before the churn, you see these companies dramatically pull back -- giving stronger companies the solid balance sheet and underwriting capabilities, and the opportunity to capture more business at a better margin.
Gabriel Tirador, president and CEO, Mercury General: Although the competitive environment remains intense, we continue to observe more filings for rate increases than rate reductions. We believe we will continue to see an increased level of rate action taken by some of our competitors.
(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)
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