According to AM Best, the increase in losses and expenses are responsible for the Property & Casualty (P&C) sector’s $4.1 billion net underwriting loss in 2021.
AM Best also reported a 7.4% growth in net earned premiums and a 45.4% decline in policyholder dividends, which were counterbalanced by an 11.7% increase in incurred losses and LAE and a 5.4% rise in underwriting expenses.
The combined ratio for the industry weakened from the prior year to 99.6%, leading the rating agency to estimate that catastrophe losses accounted for 7.7 points on the 2021 combined ratio, down from an estimated 8.0 points in the prior year.
Excluding $5.7 billion of favourable reserve development in 2021 (down from the $7.2 billion of favourable reserve development recorded in the prior year), the accident year combined ratio for the industry was 100.5%.
An 8.5% increase in net investment income and an additional $1.9 billion in other income was countered by the net underwriting loss, which reduced pre-tax operating income by 7.5%.
A $7.2 billion rise in realised capital gains contributed to an increase in the industry’s net income of 4.5% from the prior year, to $63.6 billion.
Industry surplus grew 13.6% from the end of 2020 to $1.0 trillion, as $159.6 billion of net income, change in unrealised gains, and contributed capital were reduced by $37.5 billion of stockholder dividends and other surplus losses.