The US property and casualty (P&C) industry recorded a net underwriting loss of $26.5 billion in 2022, according to data from AM Best, worsening by $21.5 billion from the previous year.
The rating agency’s data was compiled from companies whose 2022 annual statutory statements were received as of March 9th, which account for an estimated 96% of total industry net premiums written and 95% of policyholder surplus.
The group showed a substantial weakening of underwriting profitability over the year, with personal lines losses and the impact of Hurricane Ian causing its collective combined ratio to deteriorate to 102.7%.
AM Best also noted that an 8.4% growth in net earned premiums and a 21.4% decline in policyholder dividend were countered by a 13.9% increase in incurred losses and loss adjustment expenses (LAE) and a 6.2% rise in other underwriting expenses.
The personal lines segment, specifically the auto lines of business, were considered to be primarily responsible for the decline in underwriting results.
AM Best estimates that catastrophe losses accounted for 6.9 points on the 2022 combined ratio, down from an estimated 7.7 points in the prior year.
Excluding $3.8 billion of favourable reserve development during the year (down from $5.7 billion of favorable reserve development and the lowest amount of reserve releases in the last five years), the industry’s accident year combined ratio was 103.2.
Analysts further noted that the decline in pre-tax operating income was held to 15.3% as a $10.8 billion distribution of cash and Treasury bills received by Columbia Insurance Company boosted the industry’s net investment income by 27.6%.
With tax expense down 35.2% and realized capital gains down 83.2%, the industry’s net income slid 31.3% to $42.0 billion.
Additional points showed that P&C industry surplus declined 6.7% from the end of 2021, to $951.9 billion, as $67.1 billion of net income, contributed capital, and other surplus gains was reduced by $35.3 billion of stockholder dividends and a combined $136.6 billion change in unrealized losses at National Indemnity Company, Columbia Insurance Company, and State Farm Mutual.