P&C operating results improved substantially, however, investment yields declined, as the impact of lower yields on reinvestments offset growth in the industry's invested asset base.
Underwriting and operating results for the U.S. P&C industry in 2012 improved substantially compared with 2011, according to a report from A.M. Best. Net income for 2012 was $39.9 billion compared to $26.3 billion the prior year, a 52 percent increase, attributable to lower underwriting losses, increased net investment income and realized capital gains.
Policyholders surplus grew to $598.4 billion, exceeding the $572.2 billion record set in 2010. The rating company estimates 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 2011s record level drove a lower underwriting loss of $14 billion, a 53 percent improvement from the $30.1 billion loss in 2011, A.M. Best said. Net premiums written increased for the third-consecutive year, and net premiums earned increased for the second, and growth continues to accelerate. NPW is growing at 4.4 percent, up from 3.5 percent in 2011. Stronger pricing, improved economic conditions and reduced levels of return premium, particularly in commercial lines, contributed premium increases in 2012 compared to the prior year.
The industry's 2012 operating results reflect the challenging investment climate; net investment income, composed of bond interest and stock dividends, were $50.0 billion, compared with $49.4 billion in 2011.
Investment yields declined overall, as the impact of lower yields on reinvestments offset growth in the industry's invested asset base, A.M. Best said. 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.