“One might even ask if some of this new data technology is already affecting the current pricing cycle,” ALIRT says, adding that, if so, the industry may see a “soft landing” and a “more rational era of pricing in the years ahead” rather than the wild swings seen in a traditional market cycle.

On the following pages, ALIRT breaks down the industry's performance in several areas through charts and analysis based on the reported results of its composite of insurers.

The ALIRT P&C composite is comprised of 50 large U.S. personal and commercial lines P&C insurers representing approximately 53 percent of total industry net written premium. The composite excludes professional reinsurers.

All charts are from ALIRT Insurance Research.

Accident-year underwriting ratios, which showed improvement in 2012 compared to 2011, have improved at an even greater pace so far in 2013. ALIRT notes that reported results again benefitted from “substantial reserve releases. The underwriting ratios reached a multi-year high in 2011 due in part to substantial catastrophe/storm losses that year.

ALIRT says the underwriting results for 2013 so far are better than results in the previous five years and appear to be on an improving trend. The firm says this is an example of an “anomalous environment” where insurers continue to seek rate in the face of strong capital positions, low demand from insureds and strong underwriting profitability.

Direct-premium growth, which had flattened compared to 2012 through the first half of 2013, has now slowed a bit through the first nine months of the year. Net-premium growth, though, has spiked, although ALIRT says this is due to the reorganization of alarge intercompany pooling arrangements at Liberty Mutual, Nationwide and W.R. Berkley “whereby the lead pool writers—members of the ALIRT composite—retained far more premium than in prior-year periods.”

Normalizing for the pool changes, ALIRT says it still sees a positive trend for both direct- and net-premium growth, reflecting growing exposures as the economy improves as well as positive rate movement.

ALIRT says nine-month surplus (above) grew on strong operating earnings and net-capital gains as equity markets rose since year-end, offset by $18.9 billion (among its composite) of net surplus paid to parent organizations and other one-time changes to surplus of $4.1 billion. ALIRT says the majority of returned capital came from AIG subsidiary National Union Fire ($11 billion), while the majority of miscellaneous charges came from State Farm ($7.7 billion tied mostly to increased pension funding). On an annualized basis, ALIRT notes that while surplus growth is solid, it is below the annual median growth rate over the past decade.

Premium leverage (below) has risen through the first nine months of the year compared to 2012, but ALIRT says it remains low, “reflecting ample financial capacity to write business.”

Returns-on-equity (above) and earned premiums (below) fell sharply in 2011 after a bad year for catastrophe losses, but have recovered since. ALIRT says 2013, on an annualized basis, has seen a marked improvement in this area due to stronger underwriting results. So far, 2013's pre-tax return-on-equity has risen above the 15-year average for the first time since 2009, and pre-tax return-on-earned-premium has risen above the 15-year average for the first time since 2010.

The ALIRT composite showed a small underwriting profit (above) of $3.2 billion through the first nine months of the year, continuing the improvement seen since 2011, when the Composite reported an underwriting loss of $17.3 billion. Last year, the loss moderated to $9.4 billion.

Investment yields (below) continue to be dampened by the low-interest-rate environment, but ALIRT notes that the net-total return was boosted by capital gains in 2012 and so far in 2013 as equity markets surged.

Despite talk of an inevitable easing of reserve development, reserve releases (above)—which had in fact eased in 2009 and 2010—have again reached 2008 levels so far in 2013.

The favorable impact of reserve development on the composite's combined ratio (below) through the first nine months of the year was 3.1 points, more than even 2008's 2.5 points.

ALIRT says its P&C Composite Index, which tracks industry financial performance, flattened through the six- and nine-month periods this year after rising sharply in the first quarter. But the index remains “steady and strong,” ALIRT notes, reflecting the currently strong financial profile of the broad P&C industry.