After catastrophes in 2011 drove down net income for the first nine months of that year, a relatively benign first nine months in 2012 led to a rebound in insurers’ results, showing the large role weather plays for the insurance industry.

Oldwick, N.J.-based A.M. Best released its nine-month review of the P&C insurance industry last week, noting that personal-lines net income climbed to $9.4 billion for the period in 2012 compared to an after-tax loss of $1.8 billion for the same period in 2011. For commercial lines, net income rose more than 77 percent, or $6.5 billion, to $15 billion in the first nine months of 2012.

The commercial-lines combined ratio improved 6.6 points to 101.3 thanks to the combination of rate improvement and reduction in natural catastrophe losses.

Net written premium increased close to 5 percent to $144 billion from $138 billion, driven primarily by rate increases in workers’ compensation along with increasing payroll base.

The majority of the top 25 commercial-lines companies saw improved underwriting results through the first nine months of 2012. Of the 25 companies:

77 percent report improved combined ratios through the first nine months of 2012 compared to the previous year.
31 percent of carriers report combined ratios under 100.
Four carriers, 15 percent, say their combined ratio was less than 95, up from three groups in 2011.
One carrier, Best says, reports its combined ratio fell below 90 for the first nine months of 2012.

For personal lines, net premium written increased 4 percent during the period to $180 billion. The result was primarily due to rate increases on the homeowners line of business in response to losses from “more frequent and severe weather-related claims over the past several years.”

On the auto side of the business, increasing loss-cost trends that include medical inflation offset “generally stable frequency trends.”

Catastrophe losses for the segment totaled approximately $11.5 billion compared to $21.8 billion for the first nine months of 2011. The segment experienced an 8.6-point improvement in the combined ratio, to 100.2. The figures exclude any impact from Sandy, which will factor into fourth quarter and year-end results.

Touching on U.S. reinsurers, net income rose more than $1 billion to close to $7 billion, while the business produced an underwriting gain of $1.6 billion, compared to underwriting loss of $2.3 billion in 2011.

The combined ratio also improved 20.7 points to 89.7, reflecting “strong operating performance as the result of minimal catastrophe events through the third quarter.”

“Reinsures are well-capitalized and have maintained pricing integrity—taking rate increases where and when possible—and underwriting discipline,” says A.M. Best. “Companies that are able to successfully manage the challenges of current insurance market and economic conditions should be able to capitalize on opportunities as they occur.”

Special Reports /

A.M. Best: 9 Mos Industry Results Show Much Depends on the Weather

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