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U.S. P/C First-Half Net Income Plunges on Cat Losses: A.M. Best

Source: A.M. Best

Posted on 03 Oct 2011

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A.M. Best Co. reports that the U.S. property/casualty (P/C) industry’s underwriting and operating performance deteriorated significantly in the first half of 2011, battered by unprecedented catastrophe-related losses. The industry’s net income fell 67.0% to $6.9 billion, and its statutory combined ratio deteriorated more than 9.0 points to nearly 110.0 through the first half of 2011.

The industry’s performance measures are likely to remain under pressure for the remainder of 2011 because of a number of factors including: continued expectations for weak underwriting results due to elevated catastrophe-related losses through the third quarter; sustained challenging market conditions in the commercial lines segment; a sluggish economic recovery; relatively low investment yields; and volatility in the investment markets. In the first half of 2011:

• Catastrophe-related losses climbed to an estimated $27.0 billion, more than doubling the total reported for the first half of 2010, and already surpassing the year-end 2010 total. These losses contributed 12.8 points to the six-month 2011 combined ratio compared with 5.8 points during the same prior-year period.
• The industry’s investment performance improved modestly as insurers reported net investment gains of $28.7 billion, up from $27.6 billion during the first half of 2010.
• Policyholders’ surplus increased $1.9 billion, or 0.3%, to $556.2 billion, from $554.3 billion posted at year-end 2011, despite underwriting and operating results deteriorating sharply.
• Overall profitability measures remained relatively low, with the industry’s after-tax return on equity at 1.2%, down from 4.0% for the same period of 2010.

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