U.S. insurers post US$13.5 billion first-quarter income: A.M. Best

On the back of a rare underwriting gain in the first quarter of 2004, U.S. insurers are celebrating net income for the period of US$13.5 billion, according to data from A.M. Best.
This compares with net income of US$6.8 billion posted in the first quarter of 2003, when the industry had an underwriting loss of US$1.5 billion.
On a combined ratio down 6.4% to 93.3%, the industry was able bring in underwriting gains of US$5.2 billion in the first quarter of this year.
Net written premiums were up for first quarter 2004 to US$109.2 billion (Q1 2003: US$102.5 billion), while net earned premiums grew to US$102.4 billion (Q1 2003: US$95.0 billion). At the same time losses dropped for this first quarter to US$57.6 billion (Q1 2003: US$59.5 billion), representing a pure loss ratio (not including loss adjustment expenses) for first quarter 2004 of 56.2%, versus 62.3% for the same period the year prior. The industry was also able to report favorable development of prior year losses to the tune of US$1.8 billion in the first quarter of this year.
Investment income was up slightly in the first quarter of 2004 at US$9.7 billion, a $300 million increase over the same period last year. But realized gains grew to US$3.2 billion in the most recent quarter, from US$1.1 billion a year ago.
Policyholder surplus at March 31, 2004 stood at US$368.7 billion, up from US$290.6 billion at the end of the March 2003.
“The continued generation of operating profits certainly is welcomed after several years of pricing increases that for some time were eroded by adverse loss-reserve development, high reinsurance costs and reductions in investment income, before they could reach the bottom line in the form of profits,” an A.M. Best release notes. “A.M. Best believes that the biggest challenge facing insurers will be to maintain market discipline in light of flattening premium rates and increased surplus levels. To stir the pot, the trend of premium growth derived through rate increases continued to decelerate, as net premium writings increased at a significantly reduced level when compared with the first quarter of 2003.”