US P&C net income drops 15.8% in 2017

Private US property/casualty insurers saw catastrophe losses suppressing the industry's net income after taxes to $36.1 billion in 2017, a 15.8 percent decline from a year earlier, according to Verisk unit ISO.

This happened while investment gains pushed the industry's surplus to a new all-time-high value of $752.5 billion.

The industry's net investment income increased to $49.0 billion in 2017 from $46.6 billion a year earlier. Net written premium growth rebounded to 4.6 percent for 2017 from 2.7 percent in 2016.

Losses and loss adjustment expenses (LLAE) rose 8.4 percent year on year in 2017, significantly exceeding the 3.3 percent earned premium growth. The increase in LLAE was driven by catastrophe losses, as three major hurricanes, namely Harvey, Irma, and Maria, made landfall in the US in the third quarter, followed by devastating California wildfires in the fourth quarter. The net underwriting loss reached $23.2 billion, far exceeding the $4.7 billion underwriting loss for 2016.

“The catastrophe losses were largely offset by nearly $74 billion in realized and unrealized capital gains as a result of favourable market returns, which benefited in part from the anticipated positive impact of US tax reform,” said Robert Gordon, senior vice president for policy, research and international at the Property Casualty Insurers Association of America (PCI).

“US insurers are hanging onto profitability through unusually favorable financial market developments. However, the increasing underwriting losses call into question catastrophic rate adequacy, particularly based on long-term global trends toward increasing catastrophic loss frequency and severity and predictions for another active catastrophe season in the US this year,” Gordon added.

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