The underwriting gain in the current quarter reflected a GAAP combined ratio of 88.3 percent, as compared to 87.3 percent in the prior year quarter. This increase of 1.0 point in the combined ratio resulted from higher catastrophe losses (3.7 points), partially offset by higher underlying underwriting margins (2.6 points). Also included in the current quarter underwriting gain was net favorable prior year reserve development which primarily resulted from better than expected loss experience in the Surety business for accident years 2007-2008 and the Management Liability business for accident year 2007 and prior within Bond & Financial Products, as well as several lines of business within International.
The current quarter underlying GAAP combined ratio was 91.5 percent, as compared to 94.1 percent in the prior year quarter. This improvement of 2.6 points primarily resulted from a lower level of large losses as well as earned rate increases exceeding loss cost trends, partially offset by an increase in the expense ratio mostly due to lower earned premiums.
Financial, Professional & International Insurance net written premiums of $808 million increased 2 percent from the prior year quarter primarily driven by International.
Retention rates, renewal premium changes and new business volumes, as discussed below, exclude the surety line of business as surety products are generally sold on a non-recurring, project-specific basis.Bond & Financial Products
- Net written premiums of $514 million were approximately the same as the prior year quarter as growth in Management Liability was offset by lower construction surety production due to the continued low levels of government construction spending.
- Renewal premium change remained positive and continued to increase from recent quarters due to positive renewal rate change, partially offset by lower insured exposures.
- Retention rates remained strong and generally consistent with recent quarters.
- New business volumes decreased from the prior year quarter.
- Net written premiums of $294 million increased 6 percent from the prior year quarter (4 percent adjusting for the impact of changes in foreign exchange rates) primarily due to somewhat lower levels of ceded premium and growth in the United Kingdom, partially offset by lower surety production in Canada.
- Renewal premium change was slightly negative due to lower insured exposures.
- Retention rates improved from the prior year quarter.
- New business volumes increased from the prior year quarter.
|($ in millions)||Three Months Ended December 31,|
|Underwriting gain (loss)||$||(307||)||$||(16||)||$||(200||)||$||(11||)|
Underwriting gain (loss) includes :
|Net favorable prior year reserve development||33||5||22||3|
|Catastrophes, net of reinsurance||(570||)||(71||)||(370||)||(46||)|
|Net investment income||96||93||77||77|
|Operating income (loss)||$||(197||)||$||94||$||(114||)||$||77|
|GAAP combined ratio||115.2||%||99.8||%|
GAAP combined ratio excluding incremental impact of direct to consumer initiative
Impact on GAAP combined ratio
|Net favorable prior year reserve development||(1.8||)||pts||(0.3||)||pts|
|Catastrophes, net of reinsurance||30.1||pts||3.7||pts|