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Moody's: Premium Growth, Lower Cat Costs Helped P/C Insurers to Begin the Year on a Positive Note

Posted on 17 May 2012

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According to a report released this week by Moody’s Investors Service Inc.,“U.S. P&C Insurers’ 1Q12 Earnings Improve on Lower Cats; Pricing Momentum Continues,” premium growth and lower catastrophe costs helped U.S. property/casualty insurance companies to begin 2012 with positive net income.

The report cites that “investment income remains weak and reserve releases continued their moderating trend through the first quarter, prompting companies to turn up the dial on rate increases to meet return targets.” Moody’s, which is based out of New York, said that for the property/casualty companies it rates, net income for the quarter was “up substantially” by approximately 70% year over year.

Rate increases have broadened to include nearly all lines of business, accordign to the report. For the insurance carriers it rates, net written premiums were up by about 4% year over year as a result of rate increases and exposure growth. “We expect that accident-year loss ratios will improve as premiums are earned and loss costs remain relatively benign,” said Moody’s in the report.

Furthermore, the first quarter of the year was relatively quiet in terms of catastrophes, despite the tornado outbreaks that ravaged the South and Midwest in March.

In addition, Moody’s found that reserve releases continue to support earnings, “though to a significantly lesser degree than in recent periods.”

Moody’s said it expects overall reserve releases to continue to decline, with the caveat that “an area to watch is workers compensation, where some companies have continued to report adverse reserve development in the first quarter of 2012.”