The U.S. property/casualty industry’s profitability as measured by their rate of return on average policyholders’ surplus (or statutory net worth) increased by 5.8 percent in 2009, while private P/C insurers’ net income after taxes rose to $28.3 billion in 2009 from $3 billion the year before. Overall profitability measured at just 0.6 percent in 2008.
However, the recession and financial crisis continues to hamper the industry’s overall results, insurers say, stating the $28.3 billion in net income for 2009 is less than half of their $62.5 billion in net income for 2007. Similarly, insurers’ 5.8 percent overall rate of return for last year was less than half of their 12.4 percent rate of return for 2007.
Net losses on underwriting fell by $18.1 billion to $3.1 billion in 2009 from $21.2 billion in 2008, and claim costs (loss and loss adjustment expenses) dropped $31.3 billion, according to ISO and the Property Casualty Insurers Association of America (PCI).
Driven by the decline in claim costs, the combined ratio improved to 101 percent in 2009 from 105 percent in 2008.
Also contributing to profits and profitability, P/C insurers’ net investment gains rose 23.2 percent to $39 billion in 2009 from $31.7 billion in 2008.
Policyholders’ surplus rose 11.8 percent to $511.5 billion at year-end 2009 from $457.3 billion at year-end 2008. Nonetheless, surplus at year-end 2009 was down 1.2 percent compared with surplus at year-end 2007.
The figures are consolidated estimates for all private property/casualty insurers based on reports accounting for at least 96 percent of all business written by private U.S. property/casualty insurers.
“Though insurers’ 5.8 percent rate of return for 2009 was nearly 10 times their 0.6 percent rate of return for 2008, insurers’ overall rate of return remained below its long-term average,” said Michael R. Murray, ISO’s assistant vice president for financial analysis.
Overall underwriting results improved in 2009 even though premiums continued declining.
Net written premiums dropped $16 billion, or 3.7 percent, to $419 billion for 2009 from $434.9 billion for 2008. Net earned premiums declined $15.4 billion, or 3.5 percent, to $422.9 billion for 2009 from $438.3 billion for 2008. Net written premium growth has been negative for three consecutive years, with net written premium growth falling to a new record low in 2009.
Fourth-Quarter Results
The industry’s consolidated net income after taxes for fourth-quarter 2009 amounted to $12.1 billion – a $13.5 billion swing from the industry’s $1.3 billion net loss after taxes for fourth-quarter 2008. Insurers’ annualized rate of return on average surplus rose to 9.7 percent in fourth-quarter 2009 from negative 1.1 percent a year earlier.
Fourth-quarter 2009 net income for the entire insurance industry consisted of $11 billion in pretax operating income and $1.7 billion in realized capital gains on investments, less $0.5 billion in federal and foreign income taxes.
The industry’s combined ratio improved to 101.9 percent in fourth-quarter 2009 from 103.7 percent in fourth-quarter 2008.
Written premiums fell $0.8 billion, or 0.8 percent, to $97.8 billion in fourth-quarter 2009 from $98.6 billion in fourth-quarter 2008. Fourth-quarter 2009 marked the 11th consecutive quarter of declining net written premiums for the P/C industry.
Topics Trends Carriers Profit Loss Excess Surplus Market Property Casualty
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