U.S property and casualty insurers have seen their post-tax net income more than double to $34 billion in first half 2018, thanks in part to lower catastrophe losses, growing premiums, and an increase in investment income, according to a report from ISO, a Verisk Analytics business.
Meanwhile, losses and loss adjustment expenses from catastrophes saw a decline to $14.6 billion compared to $18 billion the previous year.
Net written premiums grew 13.3% from 4.1% a year earlier, affected partly by the growth in the economy, rising auto premiums, and changes that multiple insurers made to their reinsurance arrangements.
Overall, ISO says insurers enjoyed a $6 billion net underwriting gain, rebounding from a $4.6 billion net underwriting loss for H1 2017.
Net investment income jumped 14.6% to $26.8 billion, up from from $23.4 billion, with the increase mostly due to large dividends from insurers’ subsidiaries that don’t operate in P&C insurance.
As for second quarter results, insurers’ net income after taxes rose to $16.9 billion from $7.5 billion in Q2 2017, and their combined ratio improved to 97.7%, down from 101.9% a year earlier.
ISO adds that their annualised rate of return on average surplus more than doubled to 9% in Q2 2018 from 4.2% a year earlier.
Net written premiums rose 10.9% in Q2 2018, compared with 4.2% in Q2 2017.
“The strong results that insurers saw in the first quarter of 2018 continued in the second quarter, with net income more than doubling in the first half from a year earlier,” said Neil Spector, President, ISO.
“The increase in net income was the result of several factors, including lower catastrophe losses, the continued strengthening of the economy, and changes made by multiple insurers to their reinsurance arrangements.”
“But the industry results were also helped by an unusual increase in investment income. Excluding some large insurers with significantly variable income from alternative investments, investment income would have grown only 2.1 percent. That’s because yields on the core investment portfolio remain at historically low levels.
Robert Gordon, PCI’s Senior Vice President for Policy, Research and International, added, “The property/casualty insurance industry got off to a solid start in 2018. There were fewer catastrophic events in the first half of the year, which helped improve the combined ratio to 96.2 percent, the strongest result in the last decade.”
“Net income after taxes more than doubled, as did the annualized rate of return on surplus. While there were realized capital gains in the first half of 2018, they were overshadowed by larger unrealized capital losses.”
“Net yield on invested assets continues to be below average, although slightly better than the last two years. For the second half of 2018, the industry still faces the tail end of the wildfire and hurricane seasons, including losses from Hurricanes Florence and Michael; but the industry is in good health with a strong balance sheet to serve consumer needs and is enjoying record-high J.D. Power customer service ratings.”