Hartwig’s take; the economy and P&C insurance

We’re drinking from the firehose that is Bob Hartwig’s annual discussion of economic factors affecting the property and casualty industry.
His presentation was – as usual – high energy and entertaining. Example – noting that a Greek default would have little impact on the rest of the world, Hartwig said while “we may see an olive shortage”, a default of an economic entity the size of Alabama will just not matter that much.
It was also very positive.
The quick takeaway is we are close to if not at the bottom of the profitability trough, with profits likely increasing over the next four to six months. Barring natural disasters, of course.
Hartwig sees economic activity ramping up, albeit modestly and unevenly; he also opined there won’t be a double-dip recession. The economy is expanding at about 2.5%, driven by consumer sentiment (responsible for 70% of the economy) despite a very slow recovery in construction. What construction activity is going on is mostly building manufacturing plants and power generation facilities.
The P&C sector’s premium growth will be stronger than AM Best’s projections of 3.8%, but there won’t be a traditional hard market, as there remains a lot of capacity and frequency is favorable. The 28 consecutive months of growth in private sector employment, totaling 4.4 million private sector jobs since January 2010, is also favorable for work comp. However, the depth of the recession was so severe that we’ve still got a ways to go…
The public sector continues to suffer job losses, with a half-million employees shed since January 2010. This adds about a half-point to the unemployment rate, which will likely be below eight percent by the end of this year/beginning of 2013. Fortunately, the impact has been offset from a surprising source; US manufacturing growth has been pretty impressive, with a gain of a half-million jobs since January 2010.
However, there’s a lot of variation in economic performance among and between states, with North Dakota enjoying a three percentage unemployment rate compared to Nevada at 11.3%.
Hartwig talked at length about future opportunities for insurers, mentioning health care, energy and alternative energy, petrochemicals etc all as promising markets.
For some reason he presented a couple slides showing P&C industry performance during Presidential terms; the net is return on equity was highest during the Carter administration. Entertaining if not terribly enlightening…
The presentation will be here when it becomes available.