P&C industry saw profitability grow in 2020
The industry showed resiliency in the face of the pandemic, as combined ratio also showed gains.
Despite the tumultuous past year, the property & casualty insurance industry saw its overall profitability improve, according to AM Best, which noted a 68% increase in net underwriting income.
Overall, the P&C industry’s net underwriting income reached $5.4 billion in 2020, compared to $3.2 billion in 2019. The combined ratio for 2020 reached 98.6, which was also an improvement compared with the 98.9 combined ratio seen the year prior, AM Best reported.
Not surprising given the severity of storms and wildfires in 2020, catastrophe losses comprised 8 points on the combined ratio, up from an estimated 4.3 points in 2019.
While net underwriting grew, there was an uptick of 3.8% in underwriting expenses, according to the rating agency, which explained this was largely driven by insurers providing premium credits in various forms as a result of reduced exposure during stay-at-home orders and business closures. AM Best explained some insurers decided to record policyholder credits as an underwriting expense as opposed to a reduction of premium.
Further, dividends paid to policyholders grew 76% compared with the year prior. Some companies did provide pandemic-driven refunds in the form of dividend payments, the rating agency added.
Additionally, industry surplus grew 7.6% in 2020, according to AM Best, which noted net income combined with capital, as well as the net change in unrealized gains, offset the $46.9 billion in dividends paid to stockholders this past year.
The rating agency complied this data, which represents an estimated 95% of the total P&C industry’s written net premiums, from annual statutory statements.
Related: