U.S. P&C First-Half Net Income Plummets 67 Percent on Cat Losses

NU Online News Service, Sept. 30, 2:56 p.m. EDT

Catastrophes caused significant 2011 first-half underwriting losses for U.S. property and casualty insurers, driving the industry’s net income for that time period down 67 percent to $6.9 billion relative to the year before, according to an A.M. Best Special Report.

A.M. Best adds in its report, “U.S. Property/Casualty—6-Months Underwriting Trends,” that the industry is likely to remain under pressure for the remainder of 2011 as underwriting results are expected to remain weak, commercial lines are expected to remain competitive and investment yields are expected to remain low.

The report says catastrophe-related losses in the first half totaled $27 billion for U.S. insurers, contributing 12.8 points to the combined ratio, compared to 5.8 points in the prior year’s first half. The 2011 first-half combined ratio stood at 109.6, up from 100.4.

The overall industry underwriting loss for the half-year was $22 billion, compared to $2.5 billion a year ago.

For personal lines, the first-half net loss was $0.9 billion, compared to net income of $5.8 billion a year ago. The swing is attributable to an underwriting loss of $11.2 billion, driven by catastrophes, A.M. Best says.

For commercial lines, net income dropped 44.2 percent to $5.6 billion in the first half compared to net income of $10 billion a year ago. The underwriting loss was $8.4 billion, and the combined ratio climbed to 108.3 from 100.8.

A.M. Best notes that the P&C industry’s top-line growth trended upward, as net premiums written grew 2.7 percent in the half to $217 billion, up from $211.2 billion a year ago.

Policyholder surplus also increased to $556.2 billion from $554.3 billion.

Investment performance “improved modestly,” A.M. Best says, with investment gains coming in at $28.7 billion compared to $27.6 billion a year ago.

Speaking to market conditions, A.M. Best says rate increases continue for personal lines, but commercial lines has not seen widespread rate hardening despite the cat losses.