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US P&C sector’s underwriting income up 24% in Q1: A.M. Best

24th May 2019 - Author: Luke Gallin

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).

profitable-growth-reinsuranceThis 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.

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