US P/C Insurers Investment Income

By | June 17, 2024

The U.S. property/casualty insurance segment’s net investment income hit a record $73.9 billion in 2023, bolstered by the higher interest rate environment, according to a new AM Best report.

The Best’s Special Report, “U.S. P/C Insurers Achieve Record Investment Income in 2023,” reported a 1.4% increase in net investment income improvement over the previous year.

Net investment income in 2022 was skewed by a $10.8 billion intercompany distribution at a very large reinsurer, which flowed through net investment income, AM Best said.

Adjusted for this one-time transaction, the growth in the industry’s net investment income would have been nearly 20% in 2023, the rating agency added.

The growth in investment income — an important factor in making up for poor underwriting results as a result of increased weather and catastrophe events — helped to partially offset unfavorable performance in lines of business such as auto and homeowners.

The U.S. homeowners insurance segment posted its worst underwriting results in over a decade in 2023, according to an analysis by S&P Global Market Intelligence.

The net combined ratio for the homeowners business, excluding policyholders’ dividends, was 110.5 in 2023, the highest since 2011 (121.9).

Auto wasn’t much better. Auto insurers posted a less-than-desirable combined ratio of 104.9 in 2023, but the result was about 7 points better than in the historically bad year of 2022, according to S&P Global Market Intelligence.

“Aggregate net underwriting income has been volatile in the last 10 years — and often negative across the industry — and so investment income remains vital to earnings,” said Helen Andersen, industry analyst, AM Best. “Property/casualty carriers have had to balance their risk appetites with the need for higher returns when deciding on investment strategies in a rapidly changing economic landscape.”

AM Best said the P/C industry has shifted to riskier assets (also known as alternative investments like real estate, hedge funds and/or private equity interests) in its portfolio in the search of higher yields, but the percentage of Schedule BA assets within the total portfolio dropped to 6.6% in 2023 from 8.1% in the previous year.

At the same time, the share of total stocks increased dramatically in 2023, to $667 billion from approximately $600 billion.

Stocks as a percentage of surplus increased by about 10 percentage points, to 70%, as growth in stock holdings outpaced growth in surplus.

Topics USA Carriers Profit Loss Property Casualty

Was this article valuable?

Here are more articles you may enjoy.

From This Issue

Insurance Journal Magazine June 17, 2024
June 17, 2024
Insurance Journal Magazine

Construction Market & Risks Report; Markets: Umbrellas (Personal & Commercial)