January 16, 2002

PROPERTY-CASUALTY INSURERS RESERVES INADEQUATE TO COVER RISING COST OF CLAIMS, REPORTS CONNING & COMPANY

• Rising Rates Inadequate to Cover Reserve Deficiencies, reports Conning & Company
• PC Insurers Underreport Losses: Conning Study Suggests Year-End 2001 Results Should Reflect WTC Losses, Economic Slowdown and Prior Years Reserve Deficiency

(Hartford, CT) January 16, 2002 -- Insurers will have to strengthen their loss reserves in order to pay future claims, according to a new Conning & Company study. Though property-casualty rates have been increasing in the recent past, reserves are inadequate to cover the rising costs of claims. Eight of the nine property casualty lines are severely deficient with a total reserve deficiency of $16 billion - money sorely needed to catch up to claims made between 1998-2000. In addition, the recently acknowledged recession and the widespread impact of September 11 will further pressure insurers' ability to return to profitability. Individual insurers, however, appear to be slow to act when confronted with the need to strengthen their loss reserves.

According to the Conning study, "Property-Casualty Reserve Adequacy: Truth or Consequences," many insurers sought to be profitable by reducing rates and attracting premiums that could be invested in the surging equities markets. In doing so, they paid little attention to loss reserve adequacy. Despite the fact that loss reserves are the largest liability on insurers' balance sheets, most stakeholders (employees, regulators, investors and agents/brokers) do not critically examine their adequacy. However, rising loss costs and a weaker investment environment have refocused insurers on underwriting profitability and have caused greater focus on loss reserve adequacy - because loss results are a key element used in pricing.

"Individual company results, particularly for a single line, are likely to differ, often dramatically, from those of the industry. There are always reasons for results being what they are," said Geri Riley, Assistant Vice President and author of the study. "Prudent insurers will carefully examine their results, whether good or bad, to identify and explain why they are better or worse than overall industry results. Insurers cannot simply accept good results and question the bad."

While Conning is optimistic about the longer-term industry outlook, the effects of September 11th, the economic downturn and the very litigious environment will seriously challenge the industry. The survival of some insurers and reinsurers may well depend on their ability to accurately reserve and appropriately price.

This latest Conning study is designed to enable stakeholders to understand the loss reserving process and more effectively analyze loss reserves. It also provides Conning's assessment of reserve adequacy for the 9 statutory lines accounting for roughly 80% of total industry loss reserves. The study, "Property-Casualty Reserve Adequacy: Truth or Consequences" supplies insurers with the tools to help them to identify and explain the differences. The study is available from Conning & Company for $950 by calling toll free (888) 707-1177 or (860) 520-1245. A complete listing of all Conning Strategic Studies can also be found by visiting the company's web site at www.conning.com.

About Conning & Company
Conning Corporation, through its subsidiaries, provides asset management services to insurance companies and institutional investors, manages private equity funds investing in financial services companies, and conducts in-depth research on the financial services industry. Conning & Company is located at CityPlace II, 185 Asylum Street, Hartford, CT 06103.

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