June 3, 2003

Conning Research: Property-Casualty Outlook Not As Bright As Rising Premium Rates Suggest

• Need for Larger Reserves Expected to Curtail Profit Improvement
• Premium Rate Increases Expected To Moderate In 2003 and 2004
• Investment Yields Still Falling

(New York, NY) June 03, 2003 - Despite substantial rate increases over the past three years, property-casualty (P-C) insurers will not see any dramatic improvement in their financial results by 2004, according to Conning Research & Consulting, Inc.

"Property-Casualty Forecast and Analysis by Line of Insurance, First Quarter 2003" also finds that P-C insurance rates will continue to increase in 2003 and 2004 but at a more moderate pace.

"Much of the benefit of the rate increases was offset by the industry's declining investment yields," said Michael Weinstein, Director of Research at Conning. "With lower investment returns, insurers have no choice but to focus their efforts on reducing losses and other costs if they want to achieve sustainable returns on equity."

Conning anticipates that the insurance industry's statutory returns on surplus will increase but only into the low single digits as the industry adds to its loss reserves and attempts to shore up its capital base. Since the beginning of the year 2000, P-C companies in the US and Bermuda have raised approximately $21 billion by issuing common stock and other issues that are convertible into common stock.

"It is becoming clear that the P-C industry is much more leveraged than most people had thought, and companies are raising substantial amounts of capital to take advantage of the more favorable pricing environment," said Mr. Weinstein. "Many insurers now face the Hobson's choice of strengthening reserves and demonstrating that they have enough capital to continue growing at their current pace."

"Property-Casualty Forecast and Analysis by Line of Insurance, First Quarter 2003," analyzes past premium, loss, expense, and return patterns by line of insurance and forecasts what the industry's experience will be over the next three years.

"Property-Casualty Forecast and Analysis by Line of Insurance, First Quarter 2003" is available from Conning Research & Consulting, Inc. by calling toll free (888) 707-1177 or (860) 520-1521. A complete listing of all Conning research products can also be found by visiting the company's website at www.conningresearch.com.

About Conning Research & Consulting, Inc.
The Conning name has represented excellence in independent insurance industry research for more than 90 years. As a result of its wealth of experience and intimate knowledge of the insurance industry, Conning understands industry challenges and opportunities and can provide in-depth insights and analyses. Conning conducts public and proprietary research and provides consulting services to the financial services industry from offices in New York and Hartford.

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