A.M. Best’s preliminary first-quarter report on U.S. property and casualty re/insurance has shown the market is still navigating challenging waters as the trend industry loss trend continues, 2017 Q1 saw a significant net underwriting loss of $841.5 million, however, far from seriously rocking the boat, the losses don’t come near the $2 billion underwriting profit reported in the first-quarter of 2016.
The rating agency’s industry insights come from three-month 2017 interim statutory statements and represent data from 96% of the total property/casualty industry’s net premiums written.
Despite the underwriting losses, the industry saw significant net investment growth, which increased by 9.5% to $11.9 billion during 2017 Q1.
But this increased investment was offset by a $5.9 billion loss in other income – most notably due to the retroactive reinsurance contract entered into in February 2017 by American International Group (AIG) and National Indemnity Company, where the massive one-off charge to AIG amplifies the appearance of a short-term industry loss.
The contract had a big impact on the overall property and casualty Q1 results, A.M. Best noted that partly because of the contract, net income saw a 45.2% decline from the previous year-period, falling to $7.3 billion.
This impact on net income and losses, however, should even out over the course of the year, as the contract’s short-term impact wears off.
A.M. Best noted that; “Despite the significant decline, partly due to the AIG reinsurance contract, industry surplus reached a record $696.9 billion at the end of March 2017, driven by an $8.5 billion increase in unrealized gains, an increase in other surplus gains and a reduction in stockholder dividends.”
Catastrophe losses were at almost double of what they were in the first quarter of 2016 – a further factor contributing to the deterioration of the combined ratio to 99.7, down from last year’s 97.7 in Q1: “Estimated catastrophe losses of $7.6 billion, up 48% from the first-quarter 2016, accounted for 6.0 points on the combined ratio, 1.8 catastrophe points higher than what was seen in first-quarter 2016,” A.M. Best explained.
