Expect to see 2006 property casualty profits in alignment with those of 2004, says Conning Research and Consulting, Inc. They recently released their forecast for the P&C industry, which gives a peek into profits through 2008.

The results may come as a surprise to some, considering last year's ferocious hurricane season and the predictions for more heavy storms this year. The consulting firm did take past and potential future losses into consideration—they anticipate a dip in P&C profits during 2007 and 2008.

"Profitability continues through 2006, but slowing premium growth, rising loss costs and accumulating surplus will take their toll and the industry will again show combined ratios above 100 percent in 2007 and 2008," says Stephan Christiansen, Conning Director of Research.

Christiansen goes on to say that there are several factors that cloud predictions for 2006-2008, namely the competitive market conditions outside of high-risk areas, which are perpetuated by surplus accumulation, strong loss reserves and strong cash flow. Despite some premium volatility, Christiansen expects that increasing pricing in coastal exposures, as well as higher costs of availability and reduced availability of reinsurance will help moderate these premium trends through 2008.

"Overall, we expect ROEs will slowly subside, falling from 9.2 percent in 2005 to 7 percent in 2008."

The full report, "Property-Casualty Forecast & Analysis by Line of Insurance, 2005-2008" can be purchased on a quarterly basis through subscription from Conning Research and Consulting, Inc. If anyone decides to snag a copy, feel free to share other highlights via comments. :)

[Source]: Insurance Journal