In their firm's "Review/Preview" report for the p-c industry, released earlier this week, analysts at A.M. Best Company in Oldwick, N.J. referred to Citigroup as the company that "championed the cause of financial services modernization."

They also observed that the "convergence of financial services with the property-casualty industry" to date "has been limited to distributors rather than underwriters."

"The changing risk environment has introduced even greater volatility that will keep the property-casualty and financial services from combining," the report said.

Highlighting the lower returns of p-c insurers also, Keith Buckley, managing director of Fitch in Chicago, called it an "interesting sign" that "the first consolidator that included a p-c company is now divesting."

Like A.M. Best, Fitch also released a report this morning analyzing key trends for the p-c industry and projected financial results for 2001 and 2002.

For Best, the first key trend impacting p-c insurers and reinsurers is "the changing risk environment" that has exposed numerous lines of business to catastrophic risks once thought confined to natural occurrences."

Other trends driven by the changing risk environment include an accelerated hard market and a renewed flight to quality insurers, the report said.

On the positive side, the report predicts that combined ratios will "bottom out" in 2001, at 112.5 for personal lines and 118.0 for commercial lines. But, it said the recovery will be "modest" compared to prior hard markets. The report points to claims inflation, rising reinsurance costs, and declining interest rates as key contributors to the more modest recovery.

The Best report also includes detailed discussions of Midwest weather losses, auto no-fault problems and the Texas mold claims situation in personal lines, separate reviews of the commercial auto, workers' compensation, and medical malpractice markets in commercial lines, and a section on reinsurance.

Information about the report is available at www.bestweek.com/reports.