Insurance Transparency Project

Hail Fellow Insureds and Other Excluded Perils (honk):

For those new to the list, my condolences. This is an experimental blog about, yup, insurance. Every day or so I’ll offer riveting news from the insurance industry trade press, along with my own value-added commentary and analysis and strange use of fonts and type face. (Warning: may cause drowsiness, dizziness, nausea and internal bleeding; see our ad in Sports Illustrated for details).

Today’s Insurance Notes! ™ discusses insurance earnings and accounting (booyah):

From the Gray Lady:

“Allstate reported an annual profit in 2005 of $1.8 billion, mostly because of strong earnings on auto insurance, said Kevin Callahan, a portfolio manager at Century Funds in Boston, which owns 40,000 shares of Allstate…

Mr. Liddy (the outgoing CEO) said he expected record annual earnings for Allstate in 2006 of $4.8 billion to $5 billion — about the same as Allstate’s losses from hurricanes in 2005. Altogether, property insurers paid out $61 billion for hurricane damage in 2005. “

Buh, buh…Wait! I hear you say. How can Allstate have posted an “annual profit in 2005 of $1.8 billion” but also suffered ” losses” the same year of $4.8 billion to $5 billion.

That’s the micro question of how the industry suffered all-time record losses of $60 billion in 2005 from Katrina and other storms and all-time record net income of $43 billion the same year.

Couple things here, InsNerds. There are losses, and there are losses : An “insured loss” is a bit of a rhetorical trap door, I think. It’s actually “a claim that must be paid” and something against which you set up a reserve. To me, that’s a “loss” like Ford buying sheet metal is a loss.
In any case, it is certainly different than a GAAP loss on a corporate income statement. Hence the understandable confusion. (You finance people, let me hear from you. That means you, Debonaire Wall Streeter.)
But the insurance debate is part of what the very wise NYU sociologist Steven Lukes calls a “struggle of competing rhetorics.” You have an advantage if you not only control the data, but also the nomenclature.

Now, readers, merely by reading this blurb, you’ve done me a favor because I know who(m? grammar help, please! Calling Terri Rupar!) you are, and most of you are big shots in my book. Most of these will not be this long. And, of course, please tell me, and I’ll take you off the list.

Void where prohibited. All mistakes are my own. It’s not Soros’s fault. Give the guy a break.

http://www.nytimes.com/2006/10/19/business/19insure.html
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