P&C Insurers Hit by Credit Crisis, Storms

More than half the nation's property and casualty insurers suffered drops in profits in the first nine months of 2008, as major hurricanes and the subprime mortgage crisis ate at companies' bottom lines, a new analysis by TheStreet.com Ratings shows.

Profits of the nation's property and casualty insurers declined 86% to $7.5 billion during the first nine months of 2008 from $52.5 billion during the same period in 2007. Catastrophe losses were significant during the period, but unlike other times of high catastrophe losses the industry couldn't fall back on investment returns to compensate for the loss. This time, investment losses compounded the problem -- particularly for financial guarantors, which had to make payouts to companies hit by fallout from the credit crisis.

During the first nine months of the year, 1,802 companies reported declines in profits. TheStreet.com Ratings' quarterly review of nearly 3,000 property/casualty insurers encompasses all publicly traded and private insurers.

Allstate (ALL Quote), Ambac (ABK Quote), XL Capital (XL Quote), MBIA (MBI Quote), State Farm, Radian (RDN Quote) and Zurich led the industry with the largest declines in net income during the first nine months of 2008. Each of these units suffered declines of at least $1 billion compared to the same period in 2007, representing 35% of the total industry decline.

The worst results were by Allstate Insurance Co., which saw net income fall $3.3 billion to $139.7 million at Sept. 30. Ambac Assurance Corp. posted a decline of $3.2 billion, resulting in a net loss of $2.6 billion, and XL Capital Assurance shed $2.14 billion to a net loss of $2.1 billion.