P&C industry in U.S. sees net income rise 29%

The U.S. property and casualty insurance industry’s after-tax net income rose 29.1% over last year from $23.9 billion in the first half of 2004 to a record-setting $30.9 billion in the first half of 2005.
The Insurance Services Office (ISO) and the Property Casualty Insurers Association of America (PCI) also reported recently that the industry’s consolidated surplus or statutory net worth increased over the past year.
The U.S. industry’s surplus increased 4.7% from $393.8 billion at the end of 2004 to $412.5 billion as of June 30, 2005.
“Insurers’ underwriting results for the first half of 2005 were truly remarkable,” said John J. Kollar, ISO vice president for consulting and research. “At 92.7%, the combined ratio for the first half of 2005 was the best first-half combined ratio since the start of quarterly records extending back to 1986.”
The combined ratio a key measure of losses and other underwriting expenses per dollar of premium improved 1.5% to 92.7% from 94.3%.
ISO says increases on net gains in underwriting and net investment income drove the growth in net income and surplus.
Net gains on underwriting increased 43.5% — from $9.2 billion in the first half of 2004 to $13.2 billion in the first half of 2005.
“Insurers’ record net gains on underwriting in first-half 2005 were all the more remarkable given that, prior to 2004, insurers suffered net losses on underwriting during the first half of every year,” says Kollar.
The industry’s strong performance in the first half of 2005 could not have come at a better time for insurers now facing billions of dollars in insured losses from Hurricanes Katrina and Rita, ISO notes in a release on its Web site.
“Losses from Katrina and Rita will have a substantial impact on insurers’ profitability for 2005 as a whole,” says Kollar. “Using the actual tax rates and surplus as of June 30, 2005, each $10 billion in net losses from those hurricanes could reduce the industry’s net income after taxes for the full year of 2005 by $7.4 billion and cut its annual rate of return by two percentage points.”