During the first three months of 2013 private insurers in the U.S. turned an underwriting profit for the first time since the 2009 fourth-quarter.
According to ISO, a Verisk Analytics company, and the Property Casualty Insurers Association of America, insurers' first-quarter underwriting income was $4.6 billion compared to a net loss on underwriting of $100 million during the same time in 2012.
In his commentary on the results, Robert Hartwig, president of the Insurance Information Institute, says profitability was "propelled chiefly by growth in premiums, a reduction in catastrophe losses and favorable prior-year reserve development."
Direct catastrophe losses during the first quarter fell $1 billion to $2.6 billion compared to the same time a year earlier.
Insurers continue to release reserves, possibly due to lower-than expected claims from Superstorm Sandy. The industry reported $5.6 billion in favorable development during the first quarter compared to $3.9 billion in 2012's first quarter.
Driven by exposure growth and rate, P&C industry premium growth increased 4.1 percent during the first three months of 2013.
Underwriting results were "especially welcome" considering the continued challenges from declines in interest rates and investment returns, says Michael R. Murray, assistant vice president for financial analysis at ISO.
"Because of today's interest rates and investment leverage, insurers' 9.6 percent annualized overall rate of return for the first-quarter 2013 was more than a half percentage point less than their average rate of return during the 1980s, even though the 94.8 combined ratio for the first quarter was more than 14 percentage points better than the average for that decade," Murray says in a statement.
Policyholders' surplus reached a record high of $607.7 billion at the end of the March—a $20.9 billion increase PCI's Robert Gordon, senior vice president for policy development and research, says "underscores that insurers are strong, well-capitalized and well-prepared to pay future claims.
First-quarter net income for the U.S. P&C industry jumped more than 40 percent to $14.4 billion from $10.2 billion during the same period in 2012.
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