The state’s top property and casualty insurers continued to slash prices in certain lines of business and commercial coverage during the second quarter of 2008, as the industry continues its heated pricing battle.
The Hartford Financial Services Group and Travelers are both feeling the effects of the current cycle, resulting from intense competition within the industry.
The Hartford’s property-casualty business experienced written price reductions in three out of the five lines of insurance it offers, including small commercial (3 percent), middle market (6 percent) and specialty commercial coverage. That was accompanied by a 2.3 percent decline in written premiums in the first six months of 2008 compared with the 2007.
Traveler’s experienced similar results. Gross written premiums were down 3 percent in the second quarter accompanied by price reductions in its professional liability and property lines of business.
“Selling coverage below risk appropriate premiums is dangerous,” said Bob Hartwig, president of the Insurance Information Institute. “Companies may have to match that rate in the future if they want to retain that business. That could bring rates below the comfort level.”
That raises the question of whether the current “soft” market will erode the long-term profitability of either company. Most experts don’t think so, even though the current cycle has hurt both companies’ bottom lines.
The Hartford’s net income dropped 13 percent in the second quarter, thanks in part to a 36 percent decline in property-casualty insurance earnings and premiums in ongoing operations, which fell to $246 million from $384 million a year earlier. Net income for Traveler’s declined 25 percent during the second quarter to $942 million from $1.25 billion.
Andrew Colannino, vice president at A.M. Best, a New Jersey-based insurance rating agency, said declining profitability would force some competitors out the market eventually, though he didn’t predict when.
“[The] Hartford’s business mix is less susceptible to increasing price competition,” Jimmy Bhullar, an analyst with JP Morgan, wrote in a recent note. [The Hartford’s] business mix and ongoing distribution enhancements position the company defensively as P&C price competition rises further.”
The Hartford expects to achieve premium growth by appointing more agents, expanding overseas and more aggressive direct marketing to AARP members.
