P/C Insurers’ Results Much Better in 2012 Than 2011: A.M. Best

May 28, 2013

Underwriting and operating results for the U.S. property/casualty (P/C) industry improved substantially in 2012 compared with 2011. Net income increased by nearly 52 percent to $39.9 billion from $26.3 billion, reflecting lower underwriting losses and modestly increased net investment income and realized capital gains.

As a result, the industry policyholders’ surplus grew to $598.4 billion, exceeding the previous record level of $572.2 billion achieved in 2010, according to a special report by A.M. Best Co.

A.M. Best estimates that the U.S. P/C industry reported 2012 catastrophe losses of $34.2 billion, down from $41.3 billion in 2011, despite Superstorm Sandy. While catastrophe losses in total remained above average in 2012, the $7.1 billion reduction from 2011’s record level drove a lower underwriting loss of $14 billion, a 53 percent improvement from the $30.1 billion loss in 2011.

Net premiums written (NPW) and net premiums earned both increased during the year, for the third and second consecutive years, respectively. The growth of both continued to accelerate, with NPW growing at 4.4 percent, up from 3.5 percent in 2011.

A.M. Best said that a stronger pricing environment, modestly improved economic conditions and reduced levels of return premium—particularly in commercial lines—all contributed to the increased premiums in 2012.

The industry’s 2012 results do reflect the effects of the challenging investment climate. Net investment income—composed primarily of bond interest and stock dividends—changed slightly from its 2011 levels, measuring $50.0 billion compared with $49.4 billion in the prior year.

Investment yields declined overall, as the impact of lower yields on reinvestments offset growth in the industry’s invested asset base.

While the industry continues to recognize favorable development of prior accident years’ loss reserves, the level of favorable reserve development declined in 2012 from 2011, A.M. Best said.

Source: A.M. Best

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