Property/casualty insurance companies saw their net income more than double to $34 billion in first-half 2018 compared to the same period in 2017 due in part to lower catastrophe losses.
Other factors that led to the income increase include growing premiums and an increase in investment income, according to ISO Verisk and the Property Casualty Insurers Association of America (PCI).
Losses from catastrophes declined to $14.6 billion for first-half 2018 from $18 billion a year earlier, while net written premiums grew 13.3 percent in first-half 2018 from 4.1 percent a year earlier. In all, insurers had a $6 billion net underwriting gain. In the first half of 2017, they had a $4.6 billion net underwriting loss. Additionally, net investment income jumped 14.6 percent to $26.8 billion from $23.4 billion.
“The increase in net income was the result of several factors, including lower catastrophe losses, the continued strengthening of the economy, and changes made by multiple insurers to their reinsurance arrangements,” Neil Spector, president of ISO Verisk, said. “But the industry results were also helped by an unusual increase in investment income. Excluding some large insurers with significantly variable income from alternative investments, investment income would have grown only 2.1 percent. That’s because yields on the core investment portfolio remain at historically low levels. The claims from Hurricane Michael are yet to come, but the industry is well capitalized to respond to such catastrophes and has access to an array of analytical and technological tools, such as aerial imaging, to help facilitate claims administration and payments to their insureds.”
Robert Gordon, senior vice president for policy, research and international at PCI, said the combined ratio of 96.2 percent was the strongest result in the last decade.
“Net income after taxes more than doubled, as did the annualized rate of return on surplus,” Gordon said. “While there were realized capital gains in the first half of 2018, they were overshadowed by larger unrealized capital losses. Net yield on invested assets continues to be below average, although slightly better than the last two years. For the second half of 2018, the industry still faces the tail end of the wildfire and hurricane seasons, including losses from Hurricanes Florence and Michael; but the industry is in good health with a strong balance sheet to serve consumer needs and is enjoying record-high J.D. Power customer service ratings.”