Property and casualty stocks suffer double-digit losses

April 11, 5:45 PMInsurance Industry ExaminerDanny Workman

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AP Photo/Richard Drew

Last Thursday, the Property Casualty Insurers Association (PCIA) reported that insurance sales fell 1.4% to $434.6 million during 2008. That’s only the second year that premium income has declined after 47 years of contiguous increases.

Aggressive price cutting among highly competitive property and casualty insurance companies cut into sales volumes. At the same time, financially strapped clients cut back their demand for insurance policies.

In addition, the U.S. insurance industry experienced unusually high insured property claims from catastrophes including Hurricanes Ike and Gustav.

Then the worst financial crisis since the Great Depression hit.

This devastated the value of stock and bond portfolios held by property and casualty insurers to insure that policy claims get paid. Insurers like American International Group (AIG) required massive amounts of government bailout money just to remain in business.

Insurance Company Stocks Plummet

We decided to take a look at how stock prices for 10 of America’s top property and casualty insurers have fared since April 9, 2008. On average, these stocks are down 40% as of the PCIA`s announcement last Thursday.

Prognosis for Property Casualty Insurance is Grim
It is unlikely that the stock prices for these companies will rebound to early 2008 levels until the industry heals and the PCIA is once again able to report a healthy increase in annual insurance sales. That’s going to require some hefty premium hikes – an unpalatable scenario in today’s cut-throat and cost-conscious business environment.

Data Source: Forbes