Insurance companies make their earnings from underwriting profit and investment profit on the premiums collected. I haven't really covered that angle to date.
While the big story has been the bond insurer subsidiary (SCA), and subprime exposure, yesterday's XL's earnings announcement (here) talks about the hit from investment return.
The Finance Director of Lloyd's gave some comments to assure the markets that the Lloyd's Central Fund is well tended to - see coverage here.
The subprime bodies are buried in both areas and upcoming earnings announcements will show further evidence of what we at Advisen are seeing, an end to the soft market in one important market sector (Directors & Officers and Errors & Omissions insurance for Financial Institutions), although the imbalance of supply and demand is too great to change the overall market dynamic. For more on the topic, click here.