Rainy Days And Juicy Premiums

Multiline insurers will experience the best and worst of times this year. Property and casualty rates are expected to jump 7.4%, the biggest gain in seven years. That should boost profits in both auto and home coverage. But health-insurance earnings will suffer as the industry holds down rates in anticipation of health-care reform. Overall, health-insurance rates should rise 5%, less than half the increase two years ago.

Naturally, insurers think they are best at providing health coverage: "There is nothing that the federal government can do better than the private sector except build bombs," says Ronald E. Compton, chairman and chief executive of Aetna Life & Casualty Co. Still, insurers are making drastic changes. Fearing that President Clinton's plan means the government will take over many traditional insurance company functions, Aetna is opening doctors' offices in Atlanta, Baltimore, and Dallas. CIGNA Corp. is laying off 1,000 workers, 4% of its total. And ITT Hartford Insurance Group has sold its health business to competitor Massachusetts Mutual Life Insurance Co., a precursor of consolidation in the industry. Half of today's health insurers won't be in business by the end of the decade, predicts rating agency A.M. Best Co.