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TMCNet:  Fitch: Growth, Profitability Continue for U.S. Commercial Insurance Lines Sector

[April 02, 2014]

Fitch: Growth, Profitability Continue for U.S. Commercial Insurance Lines Sector

CHICAGO --(Business Wire)--

Link to Fitch Ratings' Report: Commercial Lines Market Update (Meaningful 2013 Performance Improvement)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=743800

Fitch Ratings has published its latest market update report for the U.S. commercial lines insurance market, which discusses the continuing trend of growth and profitability for the sector. In 2013, commercial lines experienced a third straight year of favorable premium growth, fueled by hardening market conditions that have persisted over the last 10 consecutive quarters.

Fitch maintains a Stable Rating Outlook for the commercial lines sector supported by improving profitability over the past two years and strong capital levels allowing insurers to withstand considerable adversity. Fitch's fundamental outlook on the commercial lines sector is also stable, reflecting challenges to further improve profitability going forward.

Net written premiums increased by 3.6% for commercial lines in aggregate in 2013, which was moderately less than 2012's growth rate. The reported accident year loss ratio improved by nearly 6 points over the prior year to 67.7% in 2013.

Property related segments reported the strongest changes given modest catastrophe losses in 2013. Workers' compensation results improved, but this segment continues to generate a significant underwriting loss. Medical professional liability is the one segment with weak pricing and deteriorating underwriting results. Commercial lines accident year loss ratios are anticipated to show moderate improvement in the near term with continued, albeit lower, price increases and modest loss cost growth.

The current hardening phase of the commercial lines underwriting cycle differs from previous hard markets. Specifically, recent price increases represet a response to past underwriting losses, and recognition that underwriting profits are the only viable replacement for falling investment income in the current low yield environment.

On a calendar year basis, commercial lines underwriting results continued to be favorably affected by recognition of reserve redundancies from prior accident years in 2013. Reserve releases increased in 2013 in spite of expectations for slowing development and several instances of significant unfavorable reserve actions.

Although calendar year development was favorable and improved from year-to-year, there is a wider disparity in reserve experience by segment as only commercial auto developed unfavorably in 2013. The segment with the strongest favorable development continues to be medical professional liability.

The full report, 'Commercial Lines Market Update', is available at 'www.fitchratings.com' under 'Insurance' and 'Research'.

Contact:

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--U.S. Property/Casualty Insurers' Year-End 2013 Financial Results (March 2014);

--Insurance Rating Methodology (November 2013).

Applicable Criteria and Related Research:

Property/Casualty Insurers' 2013 Financial Results -- Amended

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=742455

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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