U.S. P&C insurers saw significant deterioration in net income in 2011. According to numbers from
The organizations believe the declines are a result of net losses on underwriting, which grew to $34.9 billion in nine-months 2011 from $6.3 billion in nine-months 2010.
The combined ratio deteriorated to 109.9 percent for nine-months 2011 from 101.2 percent for nine-months 2010. “The 109.9 percent combined ratio for nine-months 2011 is the worst nine-month underwriting result since the 114.4 percent combined ratio for nine-months 2001,” said Michael Murray, ISO’s assistant VP for financial analysis. “Even after adjusting for catastrophe losses, the latest data indicates that insurers continued to face headwinds in their core business—underwriting.
ISO estimates that insurers’ net losses and loss adjustment expenses (LLAE) from catastrophes rose to $33.2 billion in nine-months 2011 from $10.8 billion in nine-months 2010. These amounts exclude LLAE that emerged after insurers closed their books for each period but do include late-emerging LLAE from events in prior periods. Murray said that insurers’ combined ratio would have risen 1.7 percentage points to 102.9 percent in nine-months 2011 if net LLAE from catastrophes had remained the same as they were in nine-months 2010. “The deterioration in adjusted underwriting results is cause for concern, because today’s low interest rates severely limit insurers’ ability to generate incremental investment income,” he said.
Some good news is that net investment gains grew $2.1 billion to $42 billion in nine-months 2011 from $39.8 billion in nine-months 2010. “Despite massive net losses on underwriting, insurers emerged from nine-months 2011 strong, well-capitalized, and capable of paying future claims,” said Robert Gordon, PCI’s SVP for policy development and research. “As of September 30, 2011, insurers had $538.6 billion in policyholders’ surplus to cover new claims and meet other contingencies — 125 times all the direct insured losses to U.S. property from Hurricane Irene.”
