A significant decline in catastrophe losses and double-digit premium growth helped U.S. private property and casualty insurers increase their net income by more than 66% in 2018 to $60 billion (after tax), according to Verisk, and the American Property Casualty Insurance Association (APCIA).
The report finds that net premiums increased year-on-year by 10.8% to $612.6 billion, driven by both organic growth and changes that numerous primary insurers made to their reinsurance agreements.
At the same time, losses and loss adjustment expenses (LAE) from catastrophes fell from $49.5 billion in 2017 to $43.3 billion in 2018.
Despite a decline in catastrophe losses for the full-year when compared with the previous year, direct cat losses in the fourth-quarter of 2018 did set a record, driven by the California wildfires and hurricane Michael.
As a result, the group of U.S. private P&C insurers recorded improved net underwriting losses of $0.1 billion and a combined ratio of 99.2%, compared with losses of $23.3 billion and a combined ratio of 103.7% in 2017.
For the fourth-quarter of last year, the group of insurers reported after-tax net income of $10.5 billion, which is down on the $13.7 billion recorded for the same period in 2017. The combined ratio also weakened in the fourth-quarter, to 104.6%.
Investment income increased in 2018 when compared with the previous year, jumping 13.2% to $55.3 billion.
Robert Gordon, senior vice president for policy, research and international, at APCIA commented: “U.S. property/casualty insurers had a marginally profitable year in 2018, roughly breaking even on underwriting and slightly increasing investment returns.
“However, industry surplus declined moderately, primarily reflecting volatile short-term market valuation of investments, with fourth-quarter 2018 unrealized capital losses the worst on record. Net earned premiums in 2018 grew twice as fast as direct written premium relative to 2017, reflecting continuing adjustments in reinsurance agreements.
“While 2018 U.S. catastrophe losses declined from 2017, insurers remain guarded because global insured catastrophe losses continued at a record pace and the fourth-quarter U.S. combined ratio spiked to 104.6 percent.”
Neil Spector, president of ISO, a Verisk business, added: “The insurance industry continued to perform well in 2018, helped by double-digit growth in premiums. Results were also helped by a decline in catastrophe losses.
“Catastrophe losses in 2018 were not low by any measure, due to two hurricanes and California wildfires, but those losses still paled in comparison to the losses caused by Hurricanes Harvey, Irma, and Maria in 2017. Fortunately, new technology-fueled by aerial imagery and property analytics-is helping improve the claims experience for policyholders, while enabling insurers to reduce costs and make underwriting and claim decisions with increased speed and precision.”
