Mid-year results mostly good news for P&C insurers, reinsurers: Fitch
Among other aspects, prior-period loss reserve releases provided a boost to underwriting performance.
Mid-year results for both U.S. property & casualty (P&C) insurers and reinsurers show sectors on the mend following a trying 2017, according to a new report from Fitch Ratings.
Operating performance moderately improved for P&C insurers and reinsurers during the first half of the year thanks to improved core loss ratios, lower catastrophe-related losses and lower taxes — the group’s overall effective tax rate declined to 17.4% in the first half of 2018, compared with 24.5% in the first half of 2017, due to the recently enacted U.S. Tax Cut and Jobs Act — along with favorable movement in loss reserves. The group operating return climbed to 8.0%, up from 6.8% in the prior year.
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First-half winners: personal lines, Florida specialist segments
The first half of 2018 also saw strong underwriting results with the group combined ratio dropping to 94.5%, down 2.0 points from the prior year. Calendar-year underwriting results improved across each of the primary insurance subsets in the first half of 2018, with the largest improvement emanating from personal lines and Florida specialist segments.
“Florida insurers especially benefitted from a decline in non-named storm catastrophe losses, which did not recur at the same level as the first half of 2017,” Director Christopher Grimes said in a statement.
Prior-period loss reserve releases also provided a boost to underwriting performance, representing approximately 1.9% of earned premium in the first half of 2018 versus 1.4% in the prior year. The favorable results benefitted the personal and commercial auto lines in reference to the most recent accident years with numerous companies reporting a stabilization in frequency trends while elevated severity trends generally persisted.
Fitch‘s ‘North American Property/Casualty Insurers’ 2018 Midyear Results’ are available on the company’s website.
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