Improved Underwriting Drives P&C’s Strong Financial Performance

December 31, 2013, 10:10 a.m. EST 1 Min Read

Personal, commercial and reinsurance segments of the P&C industry posted underwriting profits in the first nine months of 2013, resulting in a pretax operating income of $43.5 billion for the industry as a whole, up 35.3 percent from the same period in 2012, according to A.M. Best. The rating agency said the improvement in underwriting results has more than offset the decline in net investment income. Substantially higher realized capital gains further boosted net income up nearly 54.9 percent from a year earlier. Overall, the industry’s combined ratio of 96.5 has improved 3.7 points from the prior-year period.

Personal lines segment posted an after-tax net income of $12.9 billion up 42.8 percent through the first nine months of 2013 compared to the first nine months of 2012. Increased net income resulted primarily from improvement in the industry’s underwriting performance, which produced increased pretax operating income of $13.4 billion. The segment’s reported combined ratio is 97.8 at Sept. 30, 2013, a 2.6-point improvement from the combined ratio of 100.4 reported at third-quarter end 2012.

The commercial lines segment also posted improved results, although some deterioration of underwriting results occurred in the third quarter relative to earlier in the year, A.M. Best said. Through nine months of 2013, the segment’s underwriting income totaled $2.6 billion, a $6.5 billion improvement compared with 2012. The combined ratio of 96.5 reflects a 4.7-point improvement from the 101.2 posted as of third-quarter end 2012.

The reinsurance industry produced an underwriting gain of $2.7 billion, a significant increase over the same period in 2012, which produced a gain of approximately $1.5 billion. The reinsurance segment’s combined ratio of 84.4 is a modest improvement over the 89.8 recorded for nine months in 2012, A.M. Best said.

The third quarter was the third consecutive profitable quarter for the industry as a whole. A.M. Best attributed the improvement to sustained moderation in losses from catastrophes and weather-related events, and premium growth. GEICO posted the most premium growth among private auto insurers in Q3; see the full list of the 15 largest private auto insurers.