JERSEY CITY, N.J. — The private U.S. property/casualty insurance industry saw its net income after taxes drop to $15.5 billion in first-half 2017 from $21.8 billion in first-half 2016—a 29.2 percent decline—and its overall profitability as measured by its annualized rate of return on average policyholders’ surplus fall to 4.4 percent from 6.4 percent, according to ISO, a Verisk (Nasdaq:VRSK) business, and the Property Casualty Insurers Association of America (PCI).
The industry experienced $17.1 billion in direct catastrophe losses—$3.2 billion above the direct catastrophe losses for first-half 2016. Insurers’ combined ratio deteriorated to 100.7 percent for first- half 2017 from 99.7 percent for first-half 2016.
Net written premium growth recovered to 4.1 percent for first-half 2017, the same growth rate as for first-half 2015 and an improvement from 3.1 percent for first-half 2016. Net investment gains increased to $27.1 billion in first-half 2017 from $26.6 billion for first-half 2016. The industry’s surplus reached a new all-time-high value of $717.0 billion as of June 30, 2017, increasing $16.1 billion from $700.8 billion as of December 31, 2016.
“The industry surplus continued to grow steadily, reaching an all-time high in the first half of 2017. That growth is important, as the industry is facing significant losses from recent catastrophes, including Hurricanes Harvey, Irma, and Maria. Insurers and reinsurers have made use of sophisticated catastrophe management models and alternative risk transfers, but the devastation caused by the storms has highlighted the increasing severity of natural disasters.Improved post-event tools and processes such as aerial imagery, can assist the industry with the challenge of speeding up recovery to insureds. Another challenge is to expand the breadth of insurance to cover more of the losses, such as flood. Verisk is working hard to provide the necessary resources to meet insurer needs.”
“Industry financial results for the first six months of 2017 continued to deteriorate in most categories. While the worsening in the personal auto line seems to have slowed somewhat, auto losses will sharply increase in the third quarter from hurricane losses. Property catastrophe losses increased in the first half of 2017 on top of the already significant increases in 2016. Fortunately, industry surplus, bolstered by three straight quarters of large unrealized capital gains, continued to climb to a record $717 billion. Hurricanes Harvey, Irma, and Maria may wipe out some or all of the industry’s profits in 2017, but most insurers remain historically well capitalized, generally well reinsured, and in a rock-solid position of financial strength to respond to consumer needs. Unfortunately, many consumers will never fully recover from the storms, underscoring the need for expanded flood insurance coverage, stronger building requirements, and more resilient communities.”
Beth Fitzgerald, Senior Vice President, Industry Engagement, ISO
Robert Gordon, PCI’s Senior Vice President for Policy, Research and International
Insurers’ net income after taxes fell to $7.6 billion in second-quarter 2017 from $8.4 billion in second-quarter 2016, but their combined ratio declined slightly to 101.9 percent in second-quarter 2017 from 102.0 percent a year earlier.
Their annualized rate of return on average surplus dropped to 4.3 percent in second-quarter 2017 from 4.9 percent a year earlier.
Net written premiums rose 4.2 percent in second-quarter 2017, compared with 3.0 percent in second-quarter 2016.
View the full report from ISO and PCI here.
Since 1971, ISO has been a leading source of information about property/casualty insurance risk. For a broad spectrum of commercial and personal lines of insurance, ISO provides statistical, actuarial, underwriting, and claims information and analytics; compliance and fraud identification tools; policy language; information about specific locations; and technical services. ISO serves insurers, reinsurers, agents and brokers, insurance regulators, risk managers, and other participants in the property/casualty insurance marketplace. ISO is a Verisk (Nasdaq:VRSK) business. For more information, please visit www.verisk.com/iso.