Insurance Groups Say 2001 Property-Casualty Loss $7.9B

   Of DOW JONES NEWSWIRES

NEW YORK -- Property-casualty insurers lost $7.9 billion in 2001, a year marked by one of the worst insured catastrophe losses ever - the Sept. 11 terrorist attacks, according to industry groups.

The sector's "first-ever" net loss is a sharp decline from 2000, when the industry as whole posted $20.6 billion in net income, according to a joint announcement by the Insurance Information Institute, the National Association of Independent Insurers and Insurance Services Offices Inc.

"The swing to an operating loss reflects deterioration in both underwriting and investment results," said Diana Lee, NAII's vice president of research services.

The property-casualty industry's statutory surplus declined by 8.7% to $289.6 billion, down from $317.4 billion at the end of 2000.

The industry's net loss on underwriting after policyholder dividends rose nearly 70% to $53 billion, up from $31.2 billion a year earlier.

Losses from the events of Sept. 11, including workers compensation and liability, are expected to be between $30 billion and $70 billion, said John J. Kollar, an ISO vice president for consulting and research.

At the same time, non-9/11 catastrophe losses were $7.5 billion in 2001, up from $4.3 billion in 2000, said Robert P. Hartwig, III's chief economist.

Meanwhile, the sector's net investment income declined nearly 9% to $37.1 billion, down from $40.7 billion. Declining investment returns, in part, reflect lower yields on new investments and reinvested funds as the Federal Reserve lowered interest rates 11 times in 2001.

The industry's combined ratio slipped to 116% in 2001, worse than 110.1% a year ago. Combined ratio is a measure of underwriting losses and expenses per premium dollar earned.

-Chad Bray, Dow Jones Newswires; 201-938-5293; chad.bray@dowjones.com

Updated April 15, 2002 1:27 p.m. EDT