According to rating agency AM Best, the net income for publicly traded U.S. property and casualty (P&C) insurers more than doubled in 2021 to $133.9 billion despite numerous weather-related natural catastrophes, investment market volatility and the lingering economic effects of the COVID-19 pandemic.
The rating agency also noted that U.S. publicly traded P&C insurers posted gains in all key revenue and income measures, which offset the second-worst year ever in terms of billion-dollar weather and climate disasters.
The report states that a 4.0-percentage-point increase in the loss ratio is one area of concern, as traffic patterns returned to pre-pandemic levels, worsening loss severity on higher medical costs and expensive repairs.
The cost of natural catastrophes for P/C insurers approached $100 billion in 2021, leading to a median combined ratio among the publicly traded P&C insurers of 97.4 on a GAAP basis;
Premium revenue rebounded, rising 10%, following an increase of 2.9% in 2020, the lowest increase in several years.
The increase in premium in 2021 was attributable to insurers targeting coverage lines that have been generating unfavourable results, such as general liability, professional liability, commercial automobile and catastrophe-exposed property, through approved rate actions and the judicious use of pricing tools for better price adequacy.
The report noted that overall P&C revenue increased 19.7% in 2021 to $711.1 billion on the jump in premium revenue and a double-digit increase in net investment income, as well as a $6.7 billion net realised gain on investments—which compared with an almost $15 billion loss in 2020; and
Debt dropped 2.3% in 2021, while shareholders’ equity increased 8.1%. This led to a moderate decline in the debt-to-equity ratio, to 25.1 from 27.8.
Christopher Graham, senior industry analyst, industry research and analytics, AM Best commented: “The benefit of fewer drivers on U.S. roadways at the height of the pandemic was offset by reports of drivers traveling at higher average speeds, the reason for the rise in the fatality rate, which showed no signs of abating in 2021.”
