US P&C insurers report $1.5bn net underwriting loss in 1H16

Private property/casualty insurers in the US reported a $1.5 billion net underwriting loss in the first half of 2016, the first year-to-date net underwriting loss in more than three years, and saw their net income after taxes drop to $21.7 billion in the first half of 2016 from $31 billion year-on-year.

This is according to data from ISO, a Verisk Analytics business, and the Property Casualty Insurers Association of America (PCI).

The property/casualty insurers’ combined ratio had increased by 2.2 percentage points to 99.8 percent in the first half of 2015.

Furthermore, net written premiums growth slowed to 3 percent in 1H16 from 4.1 percent for the same period in 2015.

Their net investment income dropped to $22.1 billion in first-half 2016 from $23.4 billion a year earlier, and realised capital gains decreased to $4.4 billion from $8.2 billion, resulting in $26.5 billion in net investment gains for first-half 2016, down $5.1 billion from a year earlier.

Catastrophes striking the US in the first of 2016 resulted in direct insured property losses of $13.5 billion, up from $10.7 billion in 2015, and above the $11.6 billion average for first-half direct catastrophe losses for the past ten years.

"The industry's results continued to worsen in the first half of the year, as insurers reported a first-half net underwriting loss for the first time since 2012 and saw their combined ratio exceed 99 percent," said Beth Fitzgerald, president of ISO Solutions.

"Catastrophe losses remained higher than in previous years. Texas was hit by a hailstorm that has been described as the costliest in the state's history, and several states in the central United States experienced severe thunderstorms.

“With interest rates and investment yields remaining low, insurers must find ways to improve operational efficiency while still providing valuable coverage for their policyholders."

Robert Gordon, senior vice president for policy development and research at PCI, added: "The underperformance of auto insurance continues to drag down industry underwriting results. Industry statistics we're monitoring indicate that direct personal and commercial auto liability losses each spiked over 11 percent from the first half of 2015, significantly outstripping premium growth.

“The increases were a significant contributor to the worsening combined ratio, with personal lines insurers deteriorating from 100.0 to 103.1, and commercial lines insurers from 94.6 to 96.0. As a result, while overall industry surplus rose slightly to a record high, once adjusted for inflation, real surplus actually declined and insurers' return on average surplus dropped below the long-term average."