U.S. insurers regain profitability for first nine months

U.S. insurers brought home a taxed profit of US$9.3 billion for the first nine months of this year compared to a net loss of US$2.6 billion reported for the same period a year ago. The turnaround largely resulted from higher premium volumes achieved over the nine months with the industry’s overall underwriting loss plummeting on the back of significantly reduced catastrophe losses, according to data collected by the Insurance Services Office (ISO) and the National Association of Independent Insurers (NAII).
Net written premiums rose by 13.6% year-on-year to US$279.8 billion for the latest nine month reporting period, with earned premiums rising by 11% to US$258.3 over the same period. The industry produced an underwriting loss of US$18 billion for the first nine months of this year, a stark contrast to the US$37 billion loss reported for the same period in 2001. Catastrophe losses for the first nine months of this year totaled US$3.9 billion against the US$16.3 billion loss made for the same period a year ago. As a result, the industry’s combined ratio dropped to 104.9% for the latest reporting period compared with the 114.4% recorded 12 months previously. “The decline in catastrophe losses accounts for 5.2 percentage points of the 9.5 percentage point improvement in the industry’s combined ratio for nine months 2002. The new is not that catastrophe losses fell from 2001 levels elevated by terrorism losses, but that almost half of the improvement in underwriting results came from premium growth in excess of growth in non-catastrophe losses and other expenses. Firming in insurance markets is finally benefiting underwriting results,” says John Kollar, vice president of consulting and research at the ISO.
Insurers’ net investment gain, including investment income and realized capital gains, fell by 15% to US$29.5 billion for the first nine months of this year compared with the US$34.6 billion reported for the same period the previous year. Net investment income came in 5.4% lower at 26.4 billion for the latest reporting period (nine months 2001: US$28 billion) while realized capital gains plummeted by 54% year-on-year to US$3.1 billion. Overall capital losses of US$25 billion for the first nine months (including US$28 billion in unrealized capital losses minus the US$3.1 billion in capital gains) was largely responsible for a US$16.3 billion decline in the industry’s capital surplus. The industry’s consolidated capital surplus, including the US$9.3 billion gain in net income, came in at US$273.2 billion for the latest reporting period against the US$281.3 billion reported 12 months ago.