S&P maintains stable outlook for U.S. personal lines

While the U.S. commercial lines p&c sector is not gaining favor with Standard & Poor’s, the personal lines sector remains strong, the rating agency says.”Although earnings prospects for the first six months of 2005 appearfavorable for the personal lines sector–with earned premium growth,continued declining loss frequency, and lower unfavorable reservedevelopment leading to improved profitability–signs of increasedcompetition suggest the operating environment for this sector wasapproaching a cyclical peak in 2004,” says S&P credit analyst Polina Chernyak.Chernyak says the past four years of hard market pricing following years of poor results have resulted in stronger industry fundamentals in terms of risk management and underwriting. Even with the heavy catastrophe losses of 2004 as a result of the four major hurricanes touching down in the southeast U.S., and increasing competition, insurers seem prepared to stick to their pricing guns and focus on profitability over marketshare.The biggest threat is a potential growth in investment results in 2005, which could push pricing to undisciplined levels, S&P says.