In the first quarter of 2015 P&C insurers posted the best quarter in 30-years. Considering rates are flat and the industry is headed for another — or maybe now even in — a soft market, it’s a head-scratching statistic. But Robert Gordon of the Property Casualty Insurers Association of America (PCI) says the numbers are true.
The report from the ISO Insurance Programs and Analytics Services and the PCI says lower than usual catastrophe losses are the reason for a 31% jump in profitability. After taxes, the net income is $18.2 billion. That’s up from $13.9 billion in the first quarter a year ago and drove the average rate of return on policyholders’ surplus up 10.8%.
It was 8.4% in the first quarter of last year.
“Property/casualty insurers had a strong first quarter, underscoring strong capital levels, competitive markets, underwriting disciplines, and business competencies. These results, partially attributable to mild catastrophic losses, have insurers well positioned to continue to provide the necessary financial security for their policyholders as we move farther into yet another uncertain hurricane season,” Gordon said.
Also contributing to the quarter’s staggering numbers is underwriting results. The combined ratio landed at 95.7 and it compares to 97.1 in the first quarter of 2014.
Dr. Robert Hartwig — head of the Insurance Information Institute (I.I.I.) — said investment yield is good but rather low compared to the rest of the results. The net investment income — as you may remember — is dividends from stock and interest on bonds. It was $11.7 billion in the first quarter, up 4.6%.
“Despite an unusually costly winter, weak economic growth and persistently low interest rates, the industry posted another profitable quarter aided by capital gains and reserve releases, premium growth, while still modest, is now experiencing its longest sustained period of gains in a decade,” Hartwig said.
Here are other results from the report:
• Earned premiums hit $121.9 billion — up 3.7%.
• Net underwriting rose to $4.1 billion from 2.4 billion.
• Net written premiums are $125.9 billion. That’s up $4.4 billion from a year ago.
• Net written premium growth rate is 3.7% and it’s below the 4.3% average for all of 2014.
• Personal lines growth fell 0.9% to 4.6%.
• Net written premium growth for commercial lines stayed at 2.4% where it has been for quite awhile.
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