Insurance Company Earnings Plunge 53%

Standouts on the list are mortgage guaranty insurers, which sank with their underwriting businesses: MBIA, a division of Municipal Bond Investment Assurance(MBI), Ambac(ABK), PMI Mortgage Insurance Co., a unit of PMI(PMI), Radian Guaranty Inc., a subsidiary of Radian(RDN) and Triad Guaranty Insurance, which is part of Collateral Holdings.

Unlike other mortgage guaranty insurers, Ambac also suffered tremendous losses in its investment portfolio -- $1.1 billion.

Two State Farm subsidiaries also made the list -- State Farm Mutual Automobile Insurance and State Farm Fire and Casualty. They are the largest and the 11th-biggest P&C insurers in the country, respectively. Another State Farm affiliate, State Farm Lloyds, is not among the 20 companies with the greatest first-half losses. However, it lost $67 million during the period and is the largest homeowner insurer in Texas, so further losses can be expected for the remainder of 2008.

Industry capital declines

As a consequence of the across-the-board underwriting and investment losses, first-half industry capital and surplus declined for the first time in six years, dropping 1% to $638 billion from $644 billion.

National Indemnity, a division of Berkshire-Hathaway(BRK), suffered the largest decline in capital, tumbling 8.7% to $33.1 billion from $36.3 billion. The company had a $3.5 billion decrease in unrealized capital gains and also booked an $862 million decline in underwriting profits and a $135 million reduction in net realized investment results.

Allstate had a $3 billion decline in capital. Other companies with $1 billion decreases were Cincinnati Insurance, a unit of Cincinnati Financial(CINF), Westport Insurance, a division of Swiss Re, and XL Capital Assurance Inc., which is part of XL Capital(XL).

With the continued decline in the securities market during the third quarter and expected deterioration for the foreseeable future as well as the soft market slump, losses in both the underwriting business and investment returns are expected to continue throughout the remainder of 2008, further hurting profits.

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