US P&C can take margin in ’24 on premium gains & disinflation: Swiss Re
The US property & casualty business should return to underwriting profits in 2024 as faster than previously expected premium growth dovetails with easing claims inflation, analysts at the Swiss Re Institute have claimed.
Swiss Re upped its forecast for premium growth in 2024 vis-a-vis its prior stirring of the tea leaves in January. Direct written premium is now expected to rise 8% in 2024 and 5% in 2025, up from forecasts for 7% and 4.5% respectively as issued in January.
Personal lines should drive growth again in 2024 after growth in excess of 13% for both personal auto and homeowners led the drive to a 9.3% DPW gain for the fuller industry in 2023.
“In contrast, commercial lines growth is weakening as rate increases subside,” Swiss Re analysts said of commercial trends heading into 2024.
Margin gains will follow suit to premium increases, with nearly universal added benefit from ongoing claims cost disinflation, Swiss Re said. The industry should end both 2024 and 2025 with a combined ratio of 98.5%, flat to the January projection and 3.7 points down on the 2023 result.
“We continue to expect the combined ratio to improve, led by personal auto,” authors said to tie loss ratio improvement to top line gains. “We also expect loss severity to ease as average US headline CPI inflation declines.”
“This sets the stage for improved underwriting results as rate gains outpace claims costs,” analysts wrote. Personal lines will be “the key positive driver.”
Commercial lines, in turn, “face margin pressures” after having made the earlier recovery from the inflation spike although “results remain strong so far.”
In 2023 US P&C insurers beat the forecasts for underwriting earnings that Swiss Re had issued as recently as January 2024. The 102.2% combined ratio in 2023 beat a forecast from January for 103%. Swiss Re nonetheless overshot with its ROE forecast: the industry’s 3.4% results was 1.6 points below the Swiss Re estimate.
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