And customers want to know why the bigger companies are pulling out of those areas or their premiums are so high. I wonder why they thought they could get a fair shake in a Gulfport Court? I was there in ’05 in Ocean Springs and i can tell you that place was leveled. $2.5mil? that’s ridiculous.
Please cite your source that Banks and Insurance companies are the most profitable industries. P/C insurance as a whole is under the 14% ROE (return on Equity) of the Fortune 500 companies which the Wall Street Journal publishes. Insurance was in like 15th or 16th place. Hardly the most profitable.
Figured I would cite my source. According to Fortune Magazine April 30th, 2007 edition, the median ROE for all industries in the 500 was 15.4. P/C insurers was 14.9. Just a highlight of other industries doing MUCH better than insurers. Oil and Gas – 31.8% ROE, Food Services – 26.4%, Chemicals – 20.9%, Securities – 20.9%, Homebuilders – 19.1%. That is only half of the industries doing much better than insurance. Guess I should go out now and invest everything I have in the P/C market since it is such a “cash cow.”
to set the reocrd straight, State Farm made a deliberate decision to DENY wind/water combo claims knowing jurisprudence was against them. There have been many instances of ALTERED EXPERT’s reports. (OKLA & MS) State Farm’s profits for 2005 were $5Bil. Punitive damages are meant to be a punishemnt and do not reflect on the value of the specic case at hand but the PROFITS of the company. When this is considered, $2.5Mil is miniscule.
Furthermore, when I started in this industry, the P&C industry was an on and off affair runing in cycles of 4-5 years on being profitable vs losing money. In the last 10-15 years the P&C industry has consistantly made an underwriting gain. Only monopolies such as utilities and cable companies are afforded the GUARANTEE of a profit as are insurance companies. If the insurance companies even approach an underwriting loss, they are at the commissioner’s door reqeusting an increase.
And finally, State Farm is a MUTUAL COMPANY, not a stock company. Therefore, rather than paying exhorbant salaries and bonuses to upper management, they should be returning the gains to the insureds in the form of reduced premiums.
The industry did post a loss of 1.2 ROE in 2001. Granted, this was the year of 9/11, but the industry has generally been profitable, not profitable every 5 or so years; however, 2006 was the most profitable year, and 2007 looks like it might be comparable, if not even better than 2006. State Farm should pay for denying the claims, but I hate that the industry has a bad rep for making money. Isn’t that what business is about? What person starts a business hoping to lose money?
“In the last 10-15 years the P&C industry has consistantly made an underwriting gain.”
Definition of underwriting gain: Profit (deficit) that remains after paying claims and expenses. Insurers generate profits from underwriting and from investment income. Their chief business is insuring against risks for a profit, and one measure of success is whether there is money left after paying claims and expenses. This amount, if any, is their underwriting gain. See also Combined Ratio.
In fact, the industry just posted a Combined ratio under 100 in 2004, the first time since 1978. That doesn’t look like underwriting profit for the last 10-15 years. Adjustorjoe, I don’t disagree about the punishment, but I don’t agree with the rep our industry is getting. The numbers speak for themselves. There is no underwriting profit, mainly investment profit.
BTW, your entire discussion is based upon underwriting gain/loss and then you use a combined ratio figure to attempt to make your point. A little deceptive, huh? Last I recalled, the expense ratio was between 10-20%.
To clarify, the 4-5 years quote meant that every 4-5 years there was a 2-3 year spurt of underwriting gains.
Once the rates are approved to go up, it is rare that they ever get back to the lower levels completely. Some small rate reductions ocur, but not enough to cover teh entire increase.
Our industry has been taken over by bean counters who have not a clue about how and why the insurance industry works.
I used the Combined Ratio to show that with claims AND expenses the industry as a whole is not profitable. Underwriting profit is essentially the combined ratio, unless I read the definition I posted incorrectly. Don’t see any deception in that. My sources for the Combined Ratios were from AM Best, ISO, and III. I will be more than happy to provide a link to the powerpoint that goes over all this information. It was presented to a group of us at the Virginia Insurance Day. Again, my main argument was with how magnolia stated insurance is the most profitable industry. It is not, though it is profitable through investments. I guess I don’t understand why people have such a problem with them making money, but its ok for everyone else to make money. The industry is putting its self on the line to take over our risks. Don’t they deserve something for that?
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And customers want to know why the bigger companies are pulling out of those areas or their premiums are so high. I wonder why they thought they could get a fair shake in a Gulfport Court? I was there in ’05 in Ocean Springs and i can tell you that place was leveled. $2.5mil? that’s ridiculous.
Please cite your source that Banks and Insurance companies are the most profitable industries. P/C insurance as a whole is under the 14% ROE (return on Equity) of the Fortune 500 companies which the Wall Street Journal publishes. Insurance was in like 15th or 16th place. Hardly the most profitable.
Figured I would cite my source. According to Fortune Magazine April 30th, 2007 edition, the median ROE for all industries in the 500 was 15.4. P/C insurers was 14.9. Just a highlight of other industries doing MUCH better than insurers. Oil and Gas – 31.8% ROE, Food Services – 26.4%, Chemicals – 20.9%, Securities – 20.9%, Homebuilders – 19.1%. That is only half of the industries doing much better than insurance. Guess I should go out now and invest everything I have in the P/C market since it is such a “cash cow.”
to set the reocrd straight, State Farm made a deliberate decision to DENY wind/water combo claims knowing jurisprudence was against them. There have been many instances of ALTERED EXPERT’s reports. (OKLA & MS) State Farm’s profits for 2005 were $5Bil. Punitive damages are meant to be a punishemnt and do not reflect on the value of the specic case at hand but the PROFITS of the company. When this is considered, $2.5Mil is miniscule.
Furthermore, when I started in this industry, the P&C industry was an on and off affair runing in cycles of 4-5 years on being profitable vs losing money. In the last 10-15 years the P&C industry has consistantly made an underwriting gain. Only monopolies such as utilities and cable companies are afforded the GUARANTEE of a profit as are insurance companies. If the insurance companies even approach an underwriting loss, they are at the commissioner’s door reqeusting an increase.
And finally, State Farm is a MUTUAL COMPANY, not a stock company. Therefore, rather than paying exhorbant salaries and bonuses to upper management, they should be returning the gains to the insureds in the form of reduced premiums.
The industry did post a loss of 1.2 ROE in 2001. Granted, this was the year of 9/11, but the industry has generally been profitable, not profitable every 5 or so years; however, 2006 was the most profitable year, and 2007 looks like it might be comparable, if not even better than 2006. State Farm should pay for denying the claims, but I hate that the industry has a bad rep for making money. Isn’t that what business is about? What person starts a business hoping to lose money?
“In the last 10-15 years the P&C industry has consistantly made an underwriting gain.”
Definition of underwriting gain: Profit (deficit) that remains after paying claims and expenses. Insurers generate profits from underwriting and from investment income. Their chief business is insuring against risks for a profit, and one measure of success is whether there is money left after paying claims and expenses. This amount, if any, is their underwriting gain. See also Combined Ratio.
P/C Insurance Combined Ratios
1970s: 100.3
1980s: 109.2
1990s: 107.8
2000s: 102.2
In fact, the industry just posted a Combined ratio under 100 in 2004, the first time since 1978. That doesn’t look like underwriting profit for the last 10-15 years. Adjustorjoe, I don’t disagree about the punishment, but I don’t agree with the rep our industry is getting. The numbers speak for themselves. There is no underwriting profit, mainly investment profit.
You use generalized figures without documentation, just as I did. It would be interesting to see year by year or State Farm and industry as a whole.
You fail to even mention the difference between a stock company and a mutual company.
BTW, your entire discussion is based upon underwriting gain/loss and then you use a combined ratio figure to attempt to make your point. A little deceptive, huh? Last I recalled, the expense ratio was between 10-20%.
To clarify, the 4-5 years quote meant that every 4-5 years there was a 2-3 year spurt of underwriting gains.
Once the rates are approved to go up, it is rare that they ever get back to the lower levels completely. Some small rate reductions ocur, but not enough to cover teh entire increase.
Our industry has been taken over by bean counters who have not a clue about how and why the insurance industry works.
I used the Combined Ratio to show that with claims AND expenses the industry as a whole is not profitable. Underwriting profit is essentially the combined ratio, unless I read the definition I posted incorrectly. Don’t see any deception in that. My sources for the Combined Ratios were from AM Best, ISO, and III. I will be more than happy to provide a link to the powerpoint that goes over all this information. It was presented to a group of us at the Virginia Insurance Day. Again, my main argument was with how magnolia stated insurance is the most profitable industry. It is not, though it is profitable through investments. I guess I don’t understand why people have such a problem with them making money, but its ok for everyone else to make money. The industry is putting its self on the line to take over our risks. Don’t they deserve something for that?