US P&C net income drops 33% YOY

The private US property/casualty (P&C) insurance industry saw its net income after taxes decline 30.3 percent year on year to $22.4 billion in the first nine months of 2017, according to data provider ISO and the Property Casualty Insurers Association of America (PCI).

The sector’s overall profitability as measured by its annualized rate of return on average policyholders' surplus fell to 4.2 percent from 6.3 percent over the period.

The industry's loss and loss adjustment expenses (LLAE) rose 11.3 percent in nine-months 2017, significantly exceeding the 7.6 percent increase a year earlier. The increase was driven by catastrophe losses, with three major hurricanes namely Harvey, Irma, and Maria making landfall in the United States in the third quarter. The net underwriting loss reached $20.9 billion, far exceeding the $1.7 billion underwriting loss for nine-months 2016.

"Third-quarter 2017 broke 166 years of weather records with three Category 4 hurricanes making US landfall, causing one of the most expensive insured loss years in US history,” said Robert Gordon, PCI's senior vice president for policy, research and international.

“Fortunately, despite the historic, devastating catastrophes, home, auto, and business insurers were well positioned to handle these events, as policyholder surplus remains at an all-time high,” Gordon noted.

Beth Fitzgerald, senior vice president, industry engagement, ISO, said: “While the industry remains well capitalized and prepared to meet claims, the events have highlighted the need for better analytics to help insurers manage and price catastrophic risk.

“It's also illustrated the need for broader coverages, such as flood, to meet the changing needs of communities," Fitzgerald said.

Net written premium growth rebounded to 4.1 percent for nine-months 2017, the same growth rate as for nine-months 2015 and an improvement from 2.8 percent for nine-months 2016. Net investment income increased to $35.4 billion in nine-months 2017 from $33.2 billion for nine-months 2016. Despite the underwriting losses, the investment gains pushed industry's surplus to a new all-time-high value of $719.4 billion as of Sept. 30, 2017, an $18.6 billion increase from $700.8 billion as of Dec. 31, 2016.

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