Oldwick, NJ -(BusinessWire)- Growth in net premiums written remains solid and with continuing benign loss trends, the U.S. property/casualty (P/C) industry posted improved underwriting results and net income through the first six months of 2015, according to a special report by A.M. Best.
The Best Special Report, titled, “Property/Casualty Posts Improved Underwriting Results and Net Income During First Half of 2015,” states that these improvements were offset by increased stockholder dividends and other changes in surplus and unrealized capital losses. As a result, policyholders’ surplus was essentially unchanged at June 30, 2015, at USD 683.7 billion, from its prior-year position despite the improved net earnings.
Some of the highlights from this report include:
- Underwriting expense growth has outpaced premium growth through the first two quarters of 2015, with total underwriting expenses for the industry up 4.5%, to USD 71.7 billion;
- The overall industry recognized a higher level of favorable development of prior years’ core (i.e., not related to asbestos and environmental losses) loss reserves, with the combined ratio benefiting from 3.6 points of favorable development, up from 3.3 points during the first six months of 2014. The combined ratio for the total P/C industry in first-half 2015 was 97.8, an slight improvement from the 99.0 recorded in the same period in 2014;
- The commercial lines segment recorded a 5.4% increase in direct premiums written through June 30, 2015, to approximately USD 134.7 billion, up from approximately USD 127.8 billion during the same period last year. Key drivers of this increase continue to be workers’ compensation, other (general) liability, auto liability and inland marine;
- Equity holdings for the total P/C industry declined by 1.9% from their year-end 2014 value through June 30, 2015. Volatility in U.S. equity markets have driven the decline, which reflects sales of equities and unrealized losses on shares held at the end of the second quarter;
- Earnings for the personal lines segment through the second quarter of 2015 increased substantially from the prior year-to-date. After-tax net income was USD 9.9 billion for the six months ended June 30, 2015, compared with approximately USD 7.3 billion for the first six months of 2014. The increase was attributed primarily to higher realized capital gains and pretax operating income; and
- Pretax operating income of nearly USD 7.0 billion was up by 17.1% at the end of the second quarter of 2015, compared with just under USD 6.0 billion for the second quarter of 2014. The underwriting loss at mid-year 2015 was almost USD 745 million, compared with an underwriting loss of USD 2.3 billion for the same period in 2014. An increase in capital gains and a decline in incurred income taxes boosted net income by 17.9% over the prior year period, to USD 31 billion.
In light of these mid-year results, the industry appears to be on track to post a third consecutive year of underwriting profits, barring any late year catastrophic losses.
For the full copy of the special report, visit http://www3.ambest.com/bestweek/purchase.asp?record_code=242122 (Reg Req’d)