The US property and casualty (P&C) industry’s net underwriting income declined by 9.6% to $4.8 billion in the first half of 2019, according to a new report from AM Best.
The rating agency found that underwriting income was down from $5.3 billion for the same period in 2018, based on companies’ six-month interim statutory statements.
In contrast, net earned premiums grew by 3.8% during the first six months of 2019, while underwriting expenses and policyholder dividends were stable.
However, this was offset by a 5.6% increase in losses and loss adjustment expenses (LAE) incurred, which resulted in the P&C industry’s aggregate combined ratio weakening by one percentage point to 97.4%.
AM Best estimates that catastrophe losses accounted for 4.5 percentage points on the six-month 2019 combined ratio, up from an estimated 4.2 percentage points in the prior-year period.
Excluding $6.5 billion of favourable reserve development in the six-month period, the accident year combined ratio for the industry was 99.6%.
The report also noted that favourable reserve development for the industry was down $2.8 billion from the figure recorded in the prior year period.
A $432 million increase in net investment income during first-half 2019 offset most of the underwriting decline, resulting in pre-tax operating income remaining unchanged at $33.1 billion.
Additionally, AM Best recorded a $1.2 billion reduction in realised capital gains, and industry net income declined 2.4% from the prior-year period to $32.7 billion.
Finally, the report found that industry surplus increased 8.2% from the end of 2018 to $803.5 billion, largely due to a $41.3 billion change in unrealized gains and several large insurers paying less in stockholder dividends than in the prior year period.