U.S. p&c industry posts higher net income in 2012 Q2

Property and casualty insurers in the United States recorded strong earnings in the second quarter of 2012, with net income rising 343% from the same period in 2011 for a group of 26 select companies, notes a report from Moody’s Investor Services.

However, operating income for the sector – excluding the positive impact of lower catastrophic losses and favourable reserve development – dropped by roughly 11% over the second quarter of 2011 for Moody’s-rated insurers.

Moody’s reports that severe weather and wildfires led to second-quarter catastrophe losses above the 10-year average, although claims were still significantly lower than those in the second quarter of 2011. In addition, the ongoing drought in the U.S. Midwest is likely to reduce earnings in the remainder of 2012 for companies writing crop insurance, the rating agency adds.

“While the law of averages would lead us to expect that catastrophe losses will likely be lower in 2012, the severe weather and wildfires experienced through large parts of the U.S. have provided for a difficult first half, although less so than 2011,” Moody’s states in the report. “The generally strong capital positions for P/C insurers and the increase in catastrophe loss expectations should help mitigate the risk of earnings and capital surprises.”

Moody’s also notes that “rate increases have now broadened, and many companies are reporting increases across all business lines with an upward trend from the first quarter of 2012.”