With the latest round of results posted, Jason Woolfe surveys the landscape
2002 was a very hard year for the industry. It brought the hardest market anyone could remember. And a stock market crash of similar magnitude.
As Warren Buffett reminded the world recently, insurers make money by borrowing money cheaply from their policyholders and investing it wisely in the hope of making a profit by the time they have to give it back in claims.
Last year pushed both sides of the equation to extremes.
For Fortis group, 2002 was the year when its investments in shares fell below their cost price for the first time.
For Royal & SunAlliance (R&SA), it brought the slow and dismal slide in its share price from more than 400p to almost a quarter of that figure - eventually leading to its expulsion from the FTSE100.
For Aviva, it brought a 9% slip in group profits and a 40% cut in dividend.
The group had taken the precautionary step of giving the market a full 12 months' warning of what it was going to do.
For R&SA's new management it will be high on the list. The decision to keep R&SA's annual pay-out to shareholders to 6p is a heavy weight on the stock, keeping it languishing at around 60p.
Andy Haste, the former head of AXA Sun Life, who is due to take over as chief executive in April, will face the job of setting a new dividend policy. No doubt he will also hope to retrieve the company's place in the FTSE100.
The slump in world stock markets caused havoc with insurers' investment incomes.
R&SA UK chief executive Duncan Boyle said his company had foreseen the disaster.
"We were ahead of the game on equities," he told Insurance Times.
"We've consistently reduced our equity holdings over the past three years. In fact, we cut our equity holdings by about £9bn over that period."
Indeed, the value of R&SA's equity holdings fell from £3.21bn at the end of December 2001 to £1.31bn a year later.
Boyle said that reflected the sales strategy rather than the falling values of R&SA's investments.
"The vast majority of that was sales," he said.
It's a lesson managers at Fortis must have wished they had learned. The value of the group's insurance operations' equity portfolio fell by E1.71bn (£1.16bn) over 2002. Of that decline, E671m (£455m) was realised and E1.04bn (£0.71bn) was unrealised.
Zurich spent much of 2002 shoring up its position.
Once the actuaries had reviewed the books, ZFS chief executive Jim Schiro made his first move by boosting the claims reserves by $2bn (£1.26bn) covering asbestos and recent US liability issues.
Analysts at Commerzbank are banking on ZFS to benefit in 2003 and 2004 from its improved property and casualty business, based on its underlying claims ratio improvement in 2002.
But premium growth, according to Commerzbank, will "slow sharply" in 2003 as the market softens, which may result in a deterioration in the expense ratio beyond 2003. As such, the combined ratio will not improve much beyond its 99% projection, say analysts.
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