The U.S. property/casualty insurance industry saw net income drop 42.2 percent to $7.7 billion in first-quarter 2017 from $13.4 billion in first-quarter 2016, according to ISO and the Property Casualty Insurers Association of America (PCI).
The report also found that the industry’s overall profitability as measured by its annualized rate of return on average policyholders’ surplus fall to 4.4 percent from 7.9 percent,
The industry experienced $7.3 billion in direct catastrophe losses—the highest first-quarter catastrophe losses since the 1994 Northridge earthquake and $2.3 billion above the direct catastrophe losses for first-quarter 2016. Insurers’ combined ratio deteriorated to 99.6 percent for first-quarter 2017 from 97.4 percent for first-quarter 2016.
“Three major wind and thunderstorm events each resulted in more than $1 billion in damages in first-quarter 2017,” Beth Fitzgerald, senior vice president of industry engagement at ISO, said. “That’s the first time we’ve seen three events of that magnitude in the first quarter in more than 60 years. Fortunately, insurers are well capitalized, and short-term volatility in catastrophe losses is not affecting their ability to provide coverage and pay claims. They’re also seeing some acceleration in premiums and investment income. However, to remain profitable and provide appropriate returns on their capital, insurers need to plan for the long term and continue to engage in disciplined underwriting based on robust data and analytics.”
Net written premium growth accelerated to 4.0 percent for first-quarter 2017 from 3.2 percent for first-quarter 2016. Net investment gains increased by $1.2 billion to $14.4 billion in first-quarter 2017 from $13.2 billion for first-quarter 2016. The industry’s surplus reached a new all-time high value of $709.0 billion as of March 31, 2017, increasing $8.1 billion from $700.9 billion as of Dec. 31, 2016.
“Policyholder surplus increased slightly in real terms, and the overall deterioration in results in first-quarter 2017 is far less remarkable excluding a special reinsurance transaction that reduced other income and pretax operating income by $6.3 billion,” Robert Gordon, PCI’s senior vice president for policy development and research, said.