A group of 18 U.S. property/casualty (P/C) reinsurance companies recorded a combined ratio of 108.2% in 2017, a deterioration from the 95.2% recorded in the previous year as a high level of catastrophe losses pushed up the group’s loss ratio and resulted in a net underwriting loss, according to data from the Reinsurance Association of America (RAA).
The group of 18 reinsurers produced an underwriting loss for the year of $4.23 billion, compared with an underwriting gain of $1.64 billion in 2016, driven largely by the impacts of third and fourth quarter 2017 catastrophe events, which included a series of Atlantic hurricanes, powerful earthquakes in Mexico and devastating wildfires in California.
Reinsurance News discussed last year how the performance of the group of reinsurers tracked by RAA, which includes subsidiaries of global reinsurance firms, had declined through the first nine months of 2017 as the softened landscape persisted.
And despite the group appearing to have achieved a combined ratio of below 100% for the fourth-quarter of 2017, for the full-year the group’s combined ratio weakened, ending the year in unprofitable territory.
As a result of the underwriting loss, the group’s net income for the year reached just $1.38 billion, down roughly 87% from the $10.56 billion recorded at the end of 2016. Net investment income of $9.2 billion is actually an increase from the $8.4 billion recorded a year earlier, although the increase was far from sufficient to offset the deterioration of underwriting results across the group.
In fact, RAA data shows that just one company it tracks recorded a combined ratio of below 100% in 2017, compared with 15 reinsurers in 2016, underlining just how challenging the reinsurance landscape was throughout 2017.
The group’s loss ratio weakened from 69.3% in 2016 to 83.2% last year, and, at the same time, the expense ratio for the group actually improved slightly to 25% from 25.9%, explains the RAA.
Also contributing to profit deterioration is other income, which, produced a loss of $8.4 billion in 2017, compared with a loss of just over $1 billion in 2016.
But while the profitability of the 18 reinsurers declined throughout 2017, the group did write more business when compared with the previous year. RAA data shows the group’s net premiums written increased by over 10% year-on-year, hitting $45.3 billion in 2017.
Policyholders’ surplus also increased year-on-year, from $141.89 billion in 2016 to $168.63 billion in 2017, explains the RAA.
After the impacts of 2017 catastrophe events there’s been a notable uptick in reinsurance pricing, highlighted at the January renewals and which is expected to persist throughout 2018. With this in mind, it will be interesting to see how the group of 18 U.S. P/C reinsurers perform in the months ahead and whether the group can reverse the trend of deteriorating profitability.
