Operating fundamentals in the homeowners market have improved over the last three years and in 2013, the sector will generate its first statutory underwriting profit since 2007, according to a recent report from Fitch Ratings.
In its report, “Homeowners' Insurance Underwriting Trends - Benign Catastrophe Losses and Higher Prices Boost Results” examined GAAP homeowners results from 2011-2013 for The Allstate Corp., Chubb Group of Insurance Companies, The Hartford Financial Services Group Inc. and The Travelers Companies Inc.
These four large, publicly traded homeowners' insurers, which Fitch said serve as a leading indicator of industry wide results for 2013 that are not yet available, reported an aggregate homeowners' combined ratio of 79.6 percent for full year 2013, substantially improved from 92.7 percent in 2012.
None of them reported an underwriting profit in 2011, but Chubb reported essentially break-even results for the year. And, in 2012, despite losses from Superstorm Sandy, all four reported underwriting profits.
In 2013, the group reported their strongest underwriting performance of the three-year period. Fitch attributes the favorable results to favorable pricing, stricter underwriting and a sharp decline in natural catastrophe losses, which represented 12.2 percent of earned premiums in 2013 versus 22.8 percent in 2012.
The group aggregate combined ratio, excluding catastrophe losses, was 67.4 percent in 2013, nearly 10 points better than the 2011 result, reflecting rising premium rates and stricter underwriting standards. Fitch expects homeowners' insurance prices to flatten, but still trend positively in 2014, promoting further ex-cat underwriting improvement.
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