The U.S. property/casualty insurance industry’s net income after taxes rose 7.1 percent to $49.4 billion through nine-months 2007 from $46.1 billion through nine-months 2006. Fueled by the industry’s net income, policyholders’ surplus — insurers’ net worth measured according to Statutory Accounting Principles — increased $35.6 billion to $521.8 billion at Sept. 30, 2007, from $486.2 billion at year-end 2006.
But the insurance industry’s overall profitability as measured by its annualized rate of return on average policyholders’ surplus slipped to 13.1 percent in the first nine months of 2007 from 13.8 percent in the first nine months of 2006 as underwriting results deteriorated, according to ISO and the Property Casualty Insurers Association of America (PCI)
Net gains on underwriting fell 25.3 percent to $18.1 billion through nine-months 2007 from $24.3 billion through nine-months 2006.
The combined ratio worsened to 93.8 percent in the first three quarters of 2007 from 91.5 percent in the first three quarters of 2006.
The figures are consolidated estimates for all private property/casualty insurers based on reports accounting for at least 96 percent of all business written by private U.S. property/casualty insurers.
“Despite the deterioration in underwriting results, the 93.8 percent combined ratio for nine-months 2007 is the second best for the first nine months of any year since 1986, when ISO’s quarterly records begin,” said Michael R. Murray, ISO assistant vice president for financial analysis.
The deterioration in underwriting reflects weakness in written premiums as a result of escalating competition in insurance markets. Net written premiums were essentially unchanged at $337.6 billion in both nine-months 2007 and nine-months 2006, with written premium growth dropping to zero percent in the first nine months of 2007 from 5.1 percent in the first nine months of 2006.
Net earned premiums rose $4.1 billion to $329.3 billion in nine-months 2007 from $325.1 billion in nine-months 2006, but earned premium growth slowed to 1.3 percent in nine-months 2007 from 4.7 percent in nine-months 2006.
“Despite ongoing problems in some coastal property insurance markets, government data suggests that escalating competition is cutting into premium growth,” noted Murray.
Overall loss and loss adjustment expenses rose despite a decline in catastrophe losses and premium growth failed to keep pace with growth in other underwriting expenses, ISO and PCI reported.
The $18.1 billion net gain on underwriting through nine-months 2007 amounts to 5.5 percent of the $329.3 billion in net premiums earned during the period, whereas the $24.3 billion net gain on underwriting through nine-months 2006 amounted to 7.5 percent of the $325.1 billion in net premiums earned during that period.
Topics Carriers Profit Loss Excess Surplus Underwriting Property Property Casualty
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