P/C insurers report $4.7B net underwriting gain in nine-months 2018

January 29, 2019 / 2 min read

The insurance industry performed well in nine-months 2018, helped by continued growth in premiums and investment income, according to an analysis by Verisk's ISO and the American Property Casualty Insurance Association (APCI).

Sharp turnaround

Private U.S. property/casualty insurers reported a $4.7 billion net underwriting gain in the nine-month period, a sharp turnaround from a $21.0 billion net underwriting loss a year earlier, helped by a rare decrease in overall losses and loss adjustment expenses (LLAE) and significant premium growth.

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Overall LLAE decreased 0.5 percent to $310.2 billion in nine-months 2018, driven largely by a $13.1 billion decline in net LLAE from catastrophes. The last time overall LLAE decreased was in 2013, in the wake of the losses from Superstorm Sandy. As we look forward, catastrophes remain a major consideration, and the full-year industry results for 2018 will likely be affected by the losses from the California wildfires. In the coming years, insurers' underwriting results will critically depend on their ability to acquire and deploy the analytical and technological tools to help automate processes, improve decision making, and reduce costs.

Net premium growth

Net written premiums grew 11.4 percent to $468.8 billion in nine-months 2018, affected in part by organic premium growth and changes that multiple insurers made to their reinsurance arrangements.

Net investment income grew to $40.9 billion in nine-months 2018 from $35.4 billion a year earlier, with the increase affected by large dividends from insurers' subsidiaries that do not operate in property/casualty insurance. Overall, insurers' net income after taxes more than doubled to $49.5 billion in nine-months 2018 from $22.4 billion in nine-months 2017.

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Third-quarter results

Insurers' net income after taxes rose to $15.5 billion in third-quarter 2018 from $6.9 billion in third-quarter 2017, and their combined ratio improved to 99.7 percent in third-quarter 2018 from 110.7 percent a year earlier.

Their annualized rate of return on average surplus more than doubled to 8 percent in third-quarter 2018 from 3.8 percent a year earlier.

Net written premiums rose 8 percent in third-quarter 2018, compared with 4.2 percent in third-quarter 2017.