Publicly traded U.S. property/casualty (P/C) insurers performed unexpectedly well in 2020 despite extraordinary negative factors, generating operating income of $82.1 billion, according to a new AM Best special report.
The analysis in the Best’s Special Report, “US P/C Insurers Perform Well Despite COVID-19,” covers the vast majority of the U.S. P/C insurers that file U.S. GAAP statements. Along with the myriad effects of the pandemic on the P/C segment, catastrophe losses of more than $66 billion added an estimated 7.5 points to the industry’s net combined ratio (on a statutory basis), compared with 4.1 points in 2019. Despite the negative impacts, the segment’s publicly traded insurers saw lower exposures to loss for some key lines of coverage. In addition, the performance of the personal and commercial automobile, as well as workers’ compensation writers, which generate about half the P/C industry’s net premium volume, improved despite the higher catastrophe losses.
According to the report, P/C industry revenue declined slightly to $560.7 billion, driven by a significant drop of 18.8% in net investment income. Expenses grew by 4.1% in 2020, far exceeding a modest increase in premium revenue; the catastrophe losses and a sizable increase in policyholder dividends also more than countered the increase in premium revenue. Although operating income declined by more than 40% in 2020, P/C insurers were profitable. This was in part a reflection of profitability in 2019, when insurers saw a comparatively benign catastrophe year and a significant increase in investment income.
The environment for many of the P/C lines remains competitive despite the need for rate increases for key commercial lines of coverage such as catastrophe exposure property, commercial automobile, general and professional liability and medical professional liability. For many insurers, there is still a need for premium increases to reflect claims costs and loss costs more adequately to help improve underwriting profitability. Additional rate or pricing measures should boost the segment’s premium revenue and operating profitability.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=307689 .