Property and casualty insurers are expected to report solid earnings in the fourth quarter, but 2010 could be more of a struggle, according to a recent report from a New York-based financial advisory firm Keefe Bruyette & Woods.
According to the firm, the publicly traded property and casualty (P&C) insurance industry is expected to report a double-digit return on equity for 2009.
While KBW is cutting earnings estimates for a few companies with northeastern exposure to wintry weather, the firm is also raising estimates for some reinsurers.
KBW predicts that P&C overall financial performances in the fourth quarter will be driven up by rebounding financial markets, which will help boost investment income.
Overall KBW describes the fourth quarter for publicly traded insurers as “not so bad,” considering the uncertainty in the overall economy.
But while 2009 saw positive gains for the industry, the outlook “remains dim” for 2010.
That’s because “2009’s profits and balance sheet rebound are leading to ongoing price competition,” within the industry.
As a result, KBW expects fewer policies to be sold this year, while those sold are likely to be less profitable.
Additionally, 2009 was a benign weather year, with below average storm severity, which allowed insurers to pay out less in claims.
KBW said it expects a return to “normal” weather in 2010.
That will likely force insurers to dip further into their reserves.
Expense ratios could also rise as premium volumes drop and companies make “internal investments,” the report said.
“While we are generally not enthusiastic about the sector, we see a few companies with solid track records and strong balance sheets that appear positioned to benefit from marketplace dislocation,” the report concluded.
Aetna Recruits Retired General
Retired Brigadier General Michael J. Kussman has joined Aetna’s Military Health Care Advisory Committee.
Kussman is a physician who recently served as the undersecretary of health for the Veterans Health Administration (VHA) after a nearly 40-year career that includes military service, private practice in medicine, and health care administration.
As undersecretary, Kussman led the nation’s largest integrated health care system, which serves more than 5.5 million veterans, and 7.7 million enrollees throughout the United States.
Aetna created its Military Health Care Advisory Committee in 2007 to help guide its business relationships with the federal government, including its new contract with the Department of Defense’s TRICARE organization, which still remains in limbo.
In July, the DOD awarded Aetna the managed care contract, which could be worth up to $16.68 billion, to provide services for the northern region of the department’s TRICARE program, replacing Health Net.
But Health Net filed a protest a week after Aetna won the contract, and the U.S. Government Accounting Office upheld the insurer’s objections of the deal.
Aetna said it continues to cooperate with the DOD as it considers the GAO’s recommendations.
The ultimate fate of the contract still remains unclear.
The Hartford’s Bennett named to national post
A top executive at The Hartford Financial Services Group has been tapped as the board chairman of the Institute for Highway Safety.
Jonathan Bennett, the executive vice president of personal and small business insurance at The Hartford was named to the position last week.
The Insurance Institute for Highway Safety is an independent, nonprofit, scientific, and educational organization dedicated to reducing the losses — deaths, injuries, and property damage — from crashes on the nation’s highways.
Bennett succeeds Gregory Ostergren, the chairman, president, and CEO of the American National Property and Casualty Cos., who served as IIHS chairman during 2009 and will continue to serve as a member of the board.
“The institute’s work to help reduce crash injuries, deaths, and property damage on our nation’s roads is as important as ever,” Bennett said.
Greg Bordonaro is a Hartford Business Journal staff writer.
