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Insurance Income: 2014 by the Numbers

Posted By Administration, Tuesday, June 2, 2015

The annual ISO a Verisk Analytics business and the Property Casualty Insurers Association of America (PCI) report on insurance industry income was released last week. Results for 2014 are mixed and surprising to some.

Total net income for property and casualty insurers in the U.S. hit $55.5 billion after taxes. Thats about $5 billion more than Dr. Robert Hartwig, president of the Insurance Information Institute (I.I.I.) expected in his prediction earlier this year.

He and other insurance officials are delighted and surprised.

Return on investment hit 8.4% up from Dr. Hartwigs prediction of 7.7% but the ROI is down from the 2013 figure of 10.2%.

The good news is overall net profit is the second best on record since the Great Recession hit in 2007. The $55.5 billion is topped only by the 2013 figure of $63.8 billion.

A big contributor to profits is a drop in catastrophe losses again this year. Direct insurance losses were $15.5 billion up $2.6 billion from 2013 but still $7.2 billion lower than the 10-year average.

The slight rise in catastrophe losses and a slight drop in investment income helped lower the profits of 2014 when compared to 2013. Investment income fell 2.5% to $46.2 billion.

Underwriting looked good, too. Net written premiums in 2014 rose 4.1%. That however is down when compared to 4.4% in 2013. The combined ratio jumped 0.8% to 97.0 because of the three-point change in net written premiums.

Beth Fitzgerald who is the president of ISO Insurance Programs said, Right now, good underwriting results are a must for insurers. But with much of the improvement in underwriting results for the last two years attributable to moderate catastrophe losses and dependent on continued reserve releases, one has to wonder just how sustainable the net gains on underwriting will be.

Looking to the future, and in their analysis of the figures, the I.I.I. economists Dr. Hartwig and Dr. Steven Weisbart worry about the growth of exposure in the future. Net premium growth will be impacted by exposure changes and by rate change.

Workers compensation is likely to remain among the fastest growing major P/C lines of insurance in 2014 if economic growth and hiring continue as projected. With premiums for auto, home and major commercial lines all trending positively, overall industry growth could keep pace with overall economic growth in 2015, as was the case in the prior two years, they said.

All of this the two conclude is impacted by auto sales back at pre-recession level and residential construction continuing to rise and giving us the best numbers since 1999. With the pace of real GDP growth expected to quicken in 2015 to nearly 3 percent, personal and commercial lines exposures and the premiums they generate should continue to expand modestly, Hartwig and Weisbart said.

2014 2013
 Net Written Premiums  $496.581 million  $477.042 million
 Percent of change  4.1%  4.4%
 Net Earned Premiums  $487.553 million  $467.430 million
 Percent of change  6.2%  -5.5%
 Statutory Underwriting Gains (Losses)  $14.747 million  $17.761 million
 Policyholders Dividends  $2.462 million  $2.514 million
 Net Underwriting Gains (Losses)  $12.285 million  $15.247 million
 Pretax Operating Income  $55.639 million  $64.076 million
 Net Investment Income Earned  $46.152 million  $47.342 million
 Net Realized Capital Gains (Losses)  $10.063 million  $11.369 million
 Net Investment Gains  $56.215 million  $58.711 million
 Net Income (Loss) After Taxes  $55.501 million  $63.427 million
 Percentage of change  -12.5%  80.8%
 Surplus (Consolidated)  $674.714 million  $653.380 million

Loss & Loss Adjustment

Expense Reserves
 $575.607 million  $573.406 million
 Combined Ratio, Post Dividends  97.0  96.2

The report also included the fourth quarter results of 2014. PCI senior vice president Robert Gordon said the results were strong because of positive underwriting numbers. Property/casualty insurers had another moderately good year in 2014, with fourth-quarter results particularly strong, he said.

Net written premiums grew 4.8% and the combined ratio was 94.9, the lowest in three decades. Since 1986 it has averaged 106.5.


Here are the highlights of the fourth quarter of 2014:

  Net premium growth outgrew the net loss increase. It was just 2.7% for the quarter.

  Net income dropped to $17.8 billion thats down 14% from the $20.7 billion in quarter four of 2013.

  Net investment income dropped a whopping 9.2% to $11.9 billion.

  Investment gains declined $4.1 billion.

  Net gains on underwriting rose to 6.4% of the $125.3 billion in premiums earned.

  The annualized rate of return on average surplus fell to 10.6% for the quarter compared to 13% in 2013.

  Net gains on underwriting jumped more than 60% to $8 billion from $5 billion in the fourth quarter of 2013.


Sources & source link: ISO, PCI, III and Carrier Management

Tags:  Insurance Content  Insurance Income: 2014 by the Numbers  Insurance Industry  Insurance News  Weekly Industry News 

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