U.S property and casualty (P&C) insurers reported a $4.7 billion net underwriting gain over the first nine months of 2018, representing a sharp turnaround from the $21.0 billion loss in the previous year, according to a report from ISO, a Verisk business.
The report, produced in collaboration with the American Property Casualty Insurance Association (APCI), noted that insurers benefited from a rare decline in overall losses and loss adjustment expenses (LLAE) over the period, as well as significant premium growth.
LLAE decreased 0.5% to $310.2 billion in 9M 2018, driven largely by a $13.1 billion decline from catastrophes, while net written premiums grew 11.4% to $468.8 billion.
ISO also found that net investment income grew to $40.9 billion from $35.4 billion in the prior year, contributing to net income more than doubling from $22.4 billion in 9M 2017 to $49.5 billion in 9M 2018.
“The insurance industry performed well in nine-months 2018, helped by continued growth in premiums and investment income,” said Neil Specter, President of ISO. “The improvement in the industry results compared to 2017 was also helped by a rare decrease in overall losses and loss adjustment expenses.”
“The last time overall LLAE decreased was in 2013, in the wake of the losses from Superstorm Sandy,” he added. “As we look forward, catastrophes remain a major consideration, and the full-year industry results for 2018 will likely be affected by the losses from the California wildfires.”
“In the coming years, insurers’ underwriting results will critically depend on their ability to acquire and deploy the analytical and technological tools to help automate processes, improve decision making, and reduce costs.”
In the third quarter of 2018, ISO reported that insurers’ net income after taxes rose to $15.5 billion from $6.9 billion for the same period in 2018, with combined ratio also improving to 99.7% from 110.7%.
Additionally, U.S insurers’ annualised rate of return on average surplus more than doubled to 8% in Q3 2018, up from 3.8% in Q3 2017, while net written premiums rose 8% in Q3 2018, compared with 4.2% in Q3 2017.
Robert Gordon, APCI’s Senior Vice President for Policy, Research and International, also commented on the report: “The industry financial operating results reflect several positive trends through the first nine months of the year but also foreshadow potential challenges for insurers in 2019.
“Insurers’ combined ratio improved to 97.3 percent as net income and net written premiums grew from the previous year. However, insurers faced record-setting wildfires and severe hurricanes for the second straight year.”
Gordon continued: “Annualized investment return continues to underperform the industry average over the last ten years, and the stock market’s precipitous decline in December may be a harbinger of increasing volatility. Insurers are well positioned to provide stability and expanded protection opportunities to consumers in the new year.”
