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A.M. Best Special Report: Captives Doubled Profit in 2009 As Investments Rebounded

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FOR IMMEDIATE RELEASE

OLDWICK, N.J., Aug. 9, 2010-Net income doubled in 2009 over 2008 for a composite of 195 U.S. captive insurers followed by A.M. Best Co., driven by the recovery of the industry's investments. Realized capital gains totaled $82 million for 2009, compared with $1.2 billion of realized capital losses in 2008. Net underwriting income actually decreased from the prior year as captives continued to focus on providing coverage and stable pricing to their constituents and not on producing large underwriting profits.

-- Captives recorded policyholder dividends of 3.4% in 2009, down 1.2 percentage points from 2008, as companies rebuilt surplus that was destroyed during the crisis.

-- Net investment income was $1.6 billion in 2009, compared with $1.9 billion in 2008.

-- Amid continued softening market conditions, many captives have told A.M. Best they continue to hold the line and will let business go if premium rates are too low.

-- Captive formations go on even as the commercial insurance market continues to soften, and in the midst of an economic crisis, new captive domiciles are finding it difficult to establish their presence in the market.

-- The outlook for the captive industry remains stable.

-- Many well run risk retention groups (RRG) continue to thrive despite the soft market, changing market profiles and economic turmoil; within A.M. Best's universe of 32 letter-rated RRGs, admitted assets and policyholders' surplus at December 31, 2009 were up 6.9% and 19.5%, respectively, from
December 31, 2008.

Access a copy of this special report. BestWeek subscribers can download a PDF copy of all special reports as well as the associated spreadsheet data. Non-subscribers can access an excerpt of each special report and purchase individual reports and spreadsheet data.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.

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