In a recent report, rating agency AM Best has observed an improvement within the US Property/Casualty industry’s underwriting results for 2020, compared to the end of 2019.
It reported an underwriting income of $5.4bn which is almost double that of 2019 which had a result of $3.2bn, a 67.9% year on year increase.
During 2020, there was an increase in underwriting expenses up to 3.8% as some companies recorded their policyholder credits as an underwriting expense rather than a reduction of premium. Dividends to policyholders increased $3.1 billion from the prior year, as other companies provided refunds in the form of dividend payments.
The rating agency also noted that despite these increases, the underwriting income for 2020 increased significantly from the prior year, as net premiums earned increased 2.5% and incurred losses and LAE increased by only a modest 0.7%.
The combined ratio for the industry improved to 98.6%. The ratings agency estimates that catastrophe losses accounted for 8.0 points on the 2020 combined ratio, up from an estimated 4.3 points the prior year. Excluding $9.4 billion of favourable reserve development during 2020 (up from the $7.4 billion of favourable reserve development recorded in the prior year), the accident year combined ratio for the industry was 99.7%.
With net investment income remaining flat, the increase in net underwriting income, combined with a slight increase in other income, drove pre-tax operating income up 4.4% from 2019. An increase in realised capital gains offset the increase in tax expense, and industry net income also increased 4.4%, to $62.0 billion.
The Industry surplus increased 7.5% from the end of 2019 to $885.2 billion, as $108.0 billion of net income, contributed capital, and the net change in unrealised gains significantly offset $46.9 billion of stockholder dividends.