Private US property/casualty insurers’ net income after taxes rose to $43bn in nine-months 2013 from $27.8bn in nine-months 2012, with insurers’ overall profitability as measured by their annualized rate of return on average policyholders’ surplus increasing to 9.5% from 6.5%.
Insurers’ pre-tax operating income grew to $45.7bn($31.4bn). The increases in insurers’ pre-tax operating income, net income after taxes, and overall rate of return were driven by a $16.7 billion swing to $10.5bn in net gains on underwriting in nine-months 2013 from $6.2bn. The combined ratio improved to 95.8 (100.7, according to ISO and the Property Casualty Insurers Association of America(PCI).
The swing to net gains on underwriting in nine-months 2013 reflects premium growth and a decline in loss and loss adjustment expenses(LLAE).
Insurers’ overall results also benefited from a $2.1bn increase in net investment gains to $40.4bn.
The improvement in underwriting and investment results was partially offset by a drop in miscellaneous other income and higher taxes. Miscellaneous other income fell $1.3bn to $0.9 bn as insurers’ federal and foreign income taxes rose $2.2bn to $8.7bn.
Policyholders’ surplus—insurers’ net worth measured according to Statutory Accounting Principles—grew $37.3bn to $624.4bn at 30th Septemberfrom $587.1bn at year-end 2012, largely as a result of insurers’ $43bn in net income after taxes.
The figures are consolidated estimates for all private property/casualty insurers based on reports accounting for at least 96 percent of all business written by private U.S. property/casualty insurers.
“Insurers’ overall results for nine-months 2013 were certainly better than their results for nine-months 2012, with insurers posting their highest annualized rate of return and their best combined ratio through nine months since 2007,” said Michael R. Murray, ISO’s assistant vice president for financial analysis. “Insurers’ strong underwriting results lifted their annualized overall rate of return through nine months to 9.5 percent. Further analysis reveals that relatively benign weather, a sharp drop in U.S. catastrophe losses, and special developments affecting the mortgage and financial guaranty insurance segment account for much of the improvement in insurers’ results.”
The property/casualty industry’s 9.5 percent annualized rate of return for nine-months 2013 was the net result of double-digit rates of return for mortgage and financial guaranty (M&FG) insurers and single-digit rates of return for other insurers. ISO estimates that M&FG insurers’ annualized rate of return on average surplus climbed to positive 35.6 percent for nine-months 2013 from negative 6.3 percent for nine-months 2012. Excluding M&FG insurers, the industry’s annualized rate of return rose to 8.9 percent in nine-months 2013 from 6.8 percent in nine-months 2012.
“The $37.3 billion increase in policyholders’ surplus to a record-high $624.4 billion at September 30, 2013, is a testament to the strength and safety of insurers’ commitment to policyholders. Insurers are strong, well capitalized, and well prepared to pay future claims,” said Robert Gordon, PCI’s senior vice president for policy development and research. “Contrary to dire expert predictions that the 2013 hurricane season would be very active, the United States emerged relatively unscathed. But none of us can afford to let good luck lull us into a false sense of security. Catastrophe modeling indicates that events far more devastating than Superstorm Sandy, Hurricane Katrina, and the terrorist attack on the World Trade Center may occur in the future. This means that all of us — insurers, policyholders, first responders, and federal, state, and local officials — must stay focused on building economic resiliency and minimizing the human tragedy that we’ll suffer when the worst occurs.”
|
