Net income up 60% in 2013 for U.S. P&C companies after lower cat losses

Lower catastrophe losses have allowed the property and casualty insurance industry in the United States to increase net income by an estimated 60% in 2013, according to a new special report from rating agency A.M. Best.

Last year, the industry also saw a 4.8% increase in net premiums written, along with net income rising to $63.2 billion. That helped achieve a year-end surplus of $666.3 billion, according to A.M. Best.

Underwriting results were the best since 2007, with the industry achieving a combined ratio of 97.6% last year, the special report notes.

“It should also be noted that the drop in catastrophe losses chipped 4.3 points from the industry’s expected combined ratio in 2013,” it says.

“A significant factor that contributed to this improvement was that – unlike the costly presence of Superstorm Sandy in 2012 – not a single major storm made landfall in the United States last year. A.M. Best is estimating a more normal level of catastrophe losses in the coming year.”

Going into 2014, the firm said that the industry is well-capitalized to meet challenges, such as the continued low interest rate environment.

Reiterating its points from its reports at the beginning of the year, A.M. Best has issued stable ratings outlooks for personal lines and reinsurance, but a negative outlook for commercial lines.

“Despite the positive signs that were evident in 2013 results, the commercial segment’s performance is heavily influenced by a small number of groups,” its latest report says.

“A.M. Best believes that competitive pricing, low (albeit improving) investment yields and the potential for future adverse development of loss reserves will be more strongly felt by the remainder of the sector.”