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US reinsurers slide to $2.2bn underwriting loss

Only four out of 19 US reinsurers escaped an underwriting loss in the first nine months of 2011, as combined ratios were battered in a period dominated by the frequency and severity of catastrophe losses.

As the table below reveals, in the aggregate the 19 companies that the Reinsurance Association of America (RAA) classes as US reinsurers fell to an underwriting loss of $2.17bn.

The performance compared to an underwriting profit of $304mn at the same stage of last year, and caused the combined ratio for the group to deteriorate from 96.6 percent to 108.8 percent in the period.

The 19 companies the RAA compiled data for include US-domiciled reinsurers such as Transatlantic, General Re, National Indemnity and Toa Re, as well as the US reinsurance operations of several international players such as Munich Re, Swiss Re, Partner Re and XL.

Only Berkshire Hathaway's Gen Re, Scor US, Swiss Re America and Toa Re were in the black on underwriting.

The highest combined ratio was reported by US reinsurer American Agricultural Insurance Company (AAIC), at 145.2 percent. This company reinsures many of the so-called Farm Bureau insurers in the US that were so badly hit by losses from the record second quarter cats driven by tornado, hail and thunderstorm losses.

The reinsurer also experienced losses from first quarter international catastrophes, including the Japanese earthquake, on its book of broker assumed business.

EMC Reinsurance Company - the reinsurance arm of Employers Mutual - recorded the second-worst combined ratio, which came in at 129.5 percent.

Berkshire Hathaway's National Indemnity subsidiary booked a combined ratio of 119.8 percent as it was affected by US and international cat losses.

Transatlantic, Everest Re, Endurance and Odyssey Re all booked combined ratios in excess of 110 percent.

In contrast, PartnerRe, The Toa, QBE Re and Sirius America Insurance Co were all able to post sub-100 percent combined ratios.

Despite the group's underwriting deficit, it was able to book an overall net profit of $4.40bn that included investment income of $6.47bn, net realised capital gains of $706mn and other income of $64mn.

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