P&C insurers in U.S. post healthy results in first half of 2012

The operating performance of U.S. p&c insurers improved significantly in the first half of 2012, Fitch Ratings notes in a new report.

The aggregate combined ratio of 47 publicly traded property/casualty (re)insurers improved to 96.2% through mid-year 2012 from 107.9% over the same period in the prior year. This improvement was driven largely by sharp reductions in catastrophe-related losses, which declined to approximately 4% of the group’s earned premium from 16% in the first half of 2011.

Core loss ratio improvements from recent premium rate increases and other underwriting actions were a more modest factor contributing to the year-to-year change in underwriting results, Fitch states.

A large number of (re)insurers returned to generating underwriting profits in the first half of 2012. Underwriting results improved for all but six companies in Fitch’s tracked set of (re)insurers in the first half of the year.

Reinsurance specialists experienced the sharpest turnaround in performance of any sub-segment, as there have been no large catastrophe loss events in 2012 of the magnitude of the earthquakes and floods that occurred in 2011. Regional underwriters continue to post underwriting losses and weaker earnings as a result of several inland storm-related losses and inadequate pricing.

The aggregate group reported an operating profit of $22.4 billion through mid-year 2012 versus a $10.2 billion operating gain in the previous year’s first half. The group’s operating return on average equity (ROAE), which excludes realized investment gains and losses from earnings, grew to 8.5% in the first half of 2012 from 4.1% for the same period in the prior year. Seventeen companies in the group reported an operating ROAE above 10% thus far in 2012 versus only three companies a year ago.

Commercial line pricing improvements have been better than anticipated and are likely to continue through year-end 2012 and into early 2013, the rating agency reports.