U.S. property/casualty insurers reported a $4.7 billion net underwriting gain in the first nine months of 2018, which is a turnaround from a $21.0 billion net underwriting loss the previous year.
The gain was helped by a combination of a decline in overall losses and loss adjustment expenses (LLAE) as well as a significant premium growth, according to ISO and the American Property Casualty Insurance Association (APCIA).
The LLAE decreased 0.5 percent to $310.2 billion in 2018, driven primarily by a $13.1 billion decline in net LLAE from catastrophes. Net written premiums grew 11.4 percent to $468.8 billion in 2018, driven in part by organic premium growth and changes some insurers made to their reinsurance arrangements.
“The insurance industry performed well in nine-months 2018, helped by continued growth in premiums and investment income,” ISO President Neil Spector said. “The improvement in the industry results compared to 2017 was also helped by a rare decrease in overall losses and loss adjustment expenses. The last time overall LLAE decreased was in 2013, in the wake of the losses from Superstorm Sandy. As we look forward, catastrophes remain a major consideration, and the full-year industry results for 2018 will likely be affected by the losses from the California wildfires. In the coming years, insurers’ underwriting results will critically depend on their ability to acquire and deploy the analytical and technological tools to help automate processes, improve decision making, and reduce costs.”
Net investment income grew to $40.9 billion in 2018 from $35.4 billion a year earlier. The increase was impacted by large dividends from insurers’ subsidiaries that do not operate in property/casualty insurance. Overall, net income after taxes more than doubled to $49.5 billion in 2018 from $22.4 billion in 2017.
“The industry financial operating results reflect several positive trends through the first nine months of the year but also foreshadow potential challenges for insurers in 2019. Insurers’ combined ratio improved to 97.3 percent as net income and net written premiums grew from the previous year. However, insurers faced record-setting wildfires and severe hurricanes for the second straight year. Annualized investment return continues to underperform the industry average over the last ten years, and the stock market’s precipitous decline in December may be a harbinger of increasing volatility. Insurers are well positioned to provide stability and expanded protection opportunities to consumers in the new year,” Robert Gordon, senior vice president for policy, research and international at APCIA, said.