July 14, 2016 by Canadian Underwriter
Private property and casualty insurers in the United States saw their net income after taxes fall to US$13.3 billion in first-quarter of 2016 from US$18.1 billion in first-quarter 2015, a 26.6% decline, according to data from ISO, a Verisk Analytics business and the Property Casualty Insurers Association of America (PCI).
Insurers’ combined ratio deteriorated to 97.5% in first-quarter 2016 from 95.7% in Q1 2015, and net written premium growth slowed to 3.2% in first-quarter 2016 from 3.8% a year earlier, Verisk Analytics said in a press release on Thursday.
Direct insured property losses from catastrophes striking the United States totaled US$4.8 billion in first-quarter 2016, up from US$3.6 billion a year earlier and above the US$3.1 billion average for first-quarter direct catastrophe losses for the past ten years.
Net investment income dropped to US$10.9 billion in Q1 2016 from US$11.7 billion a year earlier, and realized capital gains decreased to US$2.3 billion from US$4.7 billion, resulting in US$13.2 billion in net investment gains for first-quarter 2016, down US$3.2 billion from a year earlier. Private p&c insurers also saw their annualized quarterly yield on investments drop to 2.9%, the lowest this century, from 3.1% a year earlier, Verisk reported.
“In the first quarter of 2016, insurers were affected by both one-time events and long-term trends,” said Beth Fitzgerald, president of ISO Solutions, in the release. “Severe hail in several southern states contributed to the highest first-quarter catastrophe losses in the U.S. since the 1994 Northbridge earthquake. At the same time, the combined ratio worsened from a year earlier, and interest rates remained low, leading the industry’s quarterly investment yield to its lowest level this century.”
Robert Gordon, PCI’s senior vice president for policy development and research, added that the P&C industry continued its run of profitable quarters, but with “increasing trouble spots – especially in personal lines. The personal lines market is growing rapidly, but also suffering losses that far outstrip gains – especially in auto, which is in the midst of a two-year adverse loss trend. Commercial lines were much more profitable, but even there, premium growth struggled. Insurers will be very challenged to reach long-term historical returns in the current hyper-competitive market.”