P&C underwriting income declined 9.6% in the first half of 2019
A.M. Best's new report indicates a reduction in net underwriting income despite growth in net earned premiums for the first six months of 2019.
Preliminary first-half 2019 data indicates the U.S. property and casualty industry’s net underwriting income declined by 9.6% to $4.8 billion, compared with $5.3 billion in 2018 for the same period, according to A.M. Best’s report “First Look: Six-Month 2019 Property/Casualty Financial Results.”
In addition, the first two quarters of 2019 posted a combined ratio of 97.4, signaling the industry weakened by one percentage point from 2018.
Market factors
The decline in net underwriting income comes as the industry experienced a 3.8% growth in net earned premiums, while stable underwriting expenses and policyholder dividends was offset by a 5.6% increase in losses and loss adjustment expense (LAE), says A.M. Best. However, most of the decline was balanced by a $432 million increase in net investment income, resulting in pre-tax operating income remaining unchanged at $33.1 billion for first-half 2019.
A.M Best also estimates catastrophe losses accounted for 4.5 percentage points on the combined ratio, which is more than a one percentage point increase from the 3.4 points CAT damages accounted for the year prior.
Other findings of the report include:
- Industry net income declined 2.4% from the prior-year period to $32.7 billion due to a $1.2 billion reduction in realized capital gains.
- Industry surplus increased 8.2% from year-end 2018 to $803.5 billion due to a $41.3 billion change in unrealized gains — $33.1 billion of which occurred at National Indemnity and State Farm.
- The surplus was also due to Federal Insurance Company, Hartford Fire Insurance Company, and National Indemnity paying $5.9 billion less in stockholder dividends than in first-half 2018.
A.M. Best’s data is derived from insurance companies’ six-month 2019 interim statutory statements, representing 97% of total industry net premiums written and 95% of policyholder surplus.
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