NU Online News Service, July 25, 3:00 p.m. EDT

The property and casualty industry's figures may not be as bad as some believe, and because of that a change in the soft-market direction may be delayed until the beginning of 2013, says an industry consultant.

In a recent newsletter, Charles L. Ruoff, president of CR Market Strategies Inc., says, “Looking beneath the headline numbers, we see the continuing negative influence of the mortgage and financial-guaranty markets making the overall industry figures look worse.”

He says the first-quarter financial performance of the U.S. P&C insurance industry “suggests that the target for a 2012 cyclical change may be delayed until the start of 2013.”

He notes that overseas losses experienced by U.S. reinsurers are also a factor in making the figures look worse than they are.

Using numbers supplied by ISO, he says U.S. reinsurance and mortgage and financial-guaranty insurers account for close to 8 percent of industry premium, but account for a little more than 73 percent of reported underwriting losses.

Without those two segments, the industry combined ratio in the first quarter stands at 101.2, rather than 103.3.

“So the core industry looks to be a bit more profitable if these 'outlier' segments are removed, as each beats to a different marketing drum within the overall market,” he says.

Mortgage and financial-guaranty markets are tied to “the legacy of the subprime market, including extension into [mortgage-backed securities] and [collateralized-debt securities] that helped perpetuate that asset bubble,” Ruoff says.

He continues, “The take-away here is that the 'core' market is not as distressed in terms of underwriting results as the broader market view would have you believe. That is not exactly news, but in the effort to time the market-cycle change, it becomes very important.”