The U.S. property-casualty industry's first-quarter performance set a record, said the Insurance Services Office Inc., but increased competition is creating strains on the industry.
The Jersey City, N.J.-based ISO reported the combined ratio improved from 93.3 percent in the first quarter of 2004 to 91.9 percent, calling it "the best for any quarter."
ISO based its analysis on records going back to 1986.
Net underwriting gain improved to less than 35 percent, or $1.8 billion, going from $5.3 billion to $7.2 billion for 2005, the "largest experience" gain on underwriting in any quarter, according to the records.
Consolidated surplus increased less than 12 percent in the quarter, or more than $42 billion, going from less than $360 billion to more than $402 billion.
Net written premiums rose more than 2 percent, from less than $106 billion to more than $108 billion. However, ISO noted that this figure in fact represented a slowdown, wherein the first quarter of 2004 the figure rose less than 5 percent and in 2003 first-quarter net premiums rose more than 12 percent.
"While insurers' earnings may increase for a few quarters as past rate increases continue working their way down to the bottom line," ISO said, "signs of escalating competition suggest insurers' earnings are approaching a cyclical peak."
"We are already seeing signs of an increase in competition that could undermine insurers' profitability going forward," said John J. Kollare, ISO vice president for consulting and research, in a statement.
He noted that written premium growth peaked the third quarter of 2002 and has gone down since, and data also shows rates on renewals are now in decline for four of seven major commercial lines.
Gregory Heidrich, senior vice president for policy development and research for the Property Casualty Insurers Association of America (PCI), noted that government data also indicates intensive competition in the industry.
ISO said the industry, in the quarter, had net income after taxes of more than $17 billion–an increase of more than 29 percent, or less than $4 billion, from more than $13 billion in the first quarter of 2004.
The figures assembled by ISO and PCI, based in Des Plaines, Ill., are consolidated estimates for all private p-c insurers based on the reports of insurers that account for about 93 percent of all business written by private U.S. p-c insurers, ISO said.
The industry's pretax operating income, the sum of its gain and loss on underwriting, its net investment income and other miscellaneous income rose more than $5.8 billion, or 39.5 percent, from $14.8 billion to less than $20.6 billion.
The industry increased surplus by close to 12 percent, or $42.3 billion, from $359.5 billion to less than $402 billion.
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