A report from AM Best has described the impact of COVID-19 on the US property/casualty industry as limited.
However, there’s an expectation for consequences from the pandemic to become considerably more apparent in the second quarter.
Analysts say they are seeing somewhat greater changes in line of business underwriting results than normal, with personal lines displaying favorable movement and other lines showing mixed effects.
AM Best pegs the US P/C industry’s net underwriting income for Q1 as having increased 21.3% from the prior-year period, while a 5.5% growth in net premiums earned offset increases in incurred losses and LAE, underwriting expenses, and policyholder dividends.
The combined ratio for the industry improved slightly from the prior-year period, to 95.2.
Analysts estimate that catastrophe losses accounted for 3.2 points on the Q1 combined ratio, unchanged from the prior-year period.
Excluding $4.4 billion of favorable reserve development in the three-month period, the accident year combined ratio for the industry was 98.1.
With net investment and other income declining slightly from the prior-year period, the
improvement in underwriting income drove the 4.0% growth in pre-tax operating income.
As tax expense remained flat and realized capital gains declined $172.0 million, industry net
income increased 3.5% from the prior-year period, to $17.7 billion.
Industry surplus dropped 9.3% from the end of 2019, to $744.9 billion, due to an $83.4 billion change in net unrealized capital losses.
Jennifer Marshall, director, AM Best, said an initial look at the U.S. P/C industry’s statutory results for the first quarter showed that investments overall for this sector seem to have held up well, with the exception of equity holdings.
Total equity holdings were down approximately $103 billion in the first quarter compared with the same prior-year period, or about 21%.
This returned the value of industry’s equity-level holdings to almost its year-end 2018 level.
“At this point, the best we can reasonably expect would be a continued improvement in equity markets through the end of the (second) quarter,” Marshall said.
“We do anticipate a heightened level of investment market volatility to continue until the threat of COVID-19 abates. Net investment income may be affected as dividends received may decline with the reduction or suspension of dividends on owned equities.”
