US P&C turned a corner in record Q1; watch for growth spurts: Swiss Re

Swiss Re is changing its tune on the US P&C industry following what it called the industry's best first quarter set of earnings in 15 years, but stopped short of increasing its outlook save to admit “risks to the upside.”

“After consistently weak sector results for near two years, the dog days are over,” analysts at the Swiss Re Institute wrote in their quarterly review of the US P&C market. 

Q1 2024 brought a further improvement of the combined ratio to 94.4%, rendering the second quarter of technical profits after an extended period of dog days and the best Q1 underwriting results in 15 years, analysts noted. 

But forecasts are unmoved:  Swiss Re still expects a combined ratio of 98.5% for both 2024 and 2025, flat to the prior stirring of the tea leaves. Premium growth forecasts of 8% in 2024 and 5% in 2025 are also both flat to the prior forecast. 

“We are still in the early stages of what is forecast to be an active Atlantic hurricane season,” analysts said of their hold on margin outlook following a first quarter boosted by low cat activity.  The early view to Q2 already suggests an above-average hit, they added. 

Growth is where Swiss Re sees the upside risks to its own forecasts following a spike to 10% growth in Q1 2024.

Personal lines could be the driver, especially as “personal auto rushes back to competition.” Ad spend for personal auto more than doubled from Q4 2023 to Q1 2024 and was still rising heading into what should be a slow season, analysts wrote. 

Commercial lines, in turn, are slowing, with property lines seeing a notable deceleration in Q1 2024, analysts noted. 

Towards the bottom line, Swiss Re Institute continues to forecast a return on equity at 9.5% in 2024 and 10% in 2025, supported also by rising investment yields. 

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