The U.S. property and casualty (P&C) sector’s net underwriting income for the opening three months of 2019 improved by 24% from the same period in 2018, as premium growth, lower underwriting expenses and reduced policyholder dividends offset an increase in losses and loss adjustment expenses (LAE).
This is according to international financial services rating agency, A.M. Best’s latest Fist Look report, which examines the performance of a group of U.S. P&C companies in Q1 2019 which account for an estimated 92% of total industry net premiums written and 95% of policyholder surplus.
The higher net underwriting income recorded by the sector in Q1 was helped by 3.9% growth in net earned premiums, a 1.1% reduction in underwriting expenses, and a 5.2% reduction in policyholder dividends. A.M. Best notes that these improvements offset a 5.4% year-on-year increase in incurred losses and LAE.
Despite this, the higher losses and LAE did outpace earned premium growth, which resulted in the industry’s combined ratio falling by 1.3% in Q1 2019 when compared with Q1 2018, to 96.5%.
The ratings agency estimates that catastrophe losses accounted for 3 percentage points on the Q1 2019 combined ratio, which is a reduction from the 3.4 points posted in the first-quarter of 2018.
Favourable reserve development totalled $4.6 billion in the first three months of 2019, which is a reduction of $2.4 billion from the same period in 2018. A.M. Best notes that excluding favourable reserve development, the accident year combined ratio for the industry was 99.8% in the period.
Net investment income also increased for the sector in Q1 2019, by $1.4 billion. This, combined with the strong underwriting result led to a 16.2% jump in pre-tax operating income to $17.8 billion.
From the end of 2018, industry surplus increased by almost 5% to $769.5 billion, says A.M. Best.