2017 was a whirlwind of a year for the property & casualty insurance sector. Extreme weather events — Hurricane Harvey, Irma, and Maria, along with extreme weather events in California, in particular — disrupted the industry with record-breaking events.
Despite this, Fitch Ratings maintains a stable rating outlook for a number of sectors. The rating agency compiled GAAP year-end financial results for 51 property & casualty insurers and reinsurers that are publicly traded or report GAAP consolidated reports. The group's combined ratio rose to 102.0% in 2017 versus 96.8% in the prior year. Aggregate operating return on average equity (ROAE) in 2017 declined to 4.6% from 6.5% in 2016.
Related: Lessons learned from a painful year in insurance
|Personal lines lead the pack
The personal lines group is the only subsegment to produce an improved calendar-year combined ratio in 2017, dropping to 94.6% from 96.2% in the prior year. Fitch credited Allstate Corp. and Progressive Corp., two of the largest members, with the group's positive uptick.
Catastrophes in 2017 added 6.5 points to the personal segment combined ratio, up from 5.3 points in the prior year, with the 1.2 point increase representing the smallest year-over-year change of any segment.
|Tax reform has mixed results
As a result of the recently enacted U.S. Tax Cut and Jobs Act, companies were required to evaluate their deferred tax asset (DTA) and liabilities (DTL) positions as of year-end 2017 and report their corresponding impact into net earnings.
Of the 51 companies, 29 reported a one-time write-down of their net DTA positions, while the remaining 22 companies received a benefit from the revaluation of their net DTLs with the lower tax rate.
Fitch's “First Underwriting Loss in Six Years for P&C Insurers” special report is available at www.fitchratings.com.
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Denny Jacob
Denny Jacob is an associate editor for NU PropertyCasualty360. Contact him at [email protected].
