Pauper and Prince

Abstract

THE GAME OF MUSICAL CHAIRS is on again for fire and casualty insurance stocks. Liquidation is once more the theme song. Players are gradually withdrawing from the game. The underwriting cycle is grinding its way lower and lower, and just that much closer to the turn, when everyone will clamor to play again. But for the moment the picture is as black as any time in the long history of fire and casualty insurance. The first six months' reports have been catastrophic, without benefit of any one big catastrophe, such as a San Francisco fire, Texas City explosion, Livonia disaster, 1954 hurricane. Fire losses, after behaving admirably last year and up only 1.5% over 1954, inexplicably began to soar, rising 10% for the first six months. Auto fatalities also jumped more than 10%, 14% in some months, evidencing an increasing accident toll. Together these two trends have hurt the fire and casualty companies in their most important lines, at a time, furthermore, when rate levels in both were receding. There are other contributing causes as well. In his prize-winning annual report several years ago John A. Diemand, president, Insurance Co. of North America, stated insurance companies new style (writing many different lines of business) were like modern multi-elevator office buildings. Not all the elevators are going up or down at the same time. So generally with the different lines of insurance, not all are profitable or unprofitable at the same time. The first half of 1956 was epochal. Almost all lines were profitable at the same time.