Private US property and casualty insurers’ net income after taxes fell to $13.8 billion in Q1 of 2014 from $14.3 billion in Q1 of 2013, according to a report by the Property Casualty Insurers Association of America (PCI).
Insurers’ overall profitability as measured by their annualised rate of return on average policyholders’ surplus also fell to 8.4 percent from 9.6 percent in 2013.
Pretax operating income—the sum of net gains or losses on underwriting, net investment income, and miscellaneous other income—fell to $13.7 billion in Q1 of 2014 from $15.8 billion in Q1 of 2013.
Deterioration in underwriting results prompted the decreases in insurers’ pretax operating income, net income after taxes and the overall rate of return, with net gains on underwriting falling $2.3 billion to $2.2 billion in Q1 of 2014 from $4.5 billion in Q1 of 2013.
The combined ratio deteriorated to 97.3 percent from 94.9 percent, according to ISO, a Verisk Analytics company.
Net gains on underwriting dropped as premium growth slowed and net loss and loss adjustment expenses (LLAE) surged upward, with quarterly LLAE rising for the first time since Superstorm Sandy struck in Q4 of 2012.
The deterioration in underwriting results in Q1 of 2014 also reflects increases in underwriting expenses and dividends to policyholders, which both rose compared with their levels in Q1 of 2013.
Partially offsetting the decline in net gains on underwriting, insurers’ net investment gains rose $1.3 billion to $14.1 billion in Q1 of 2014 from $12.8 billion in Q1 of 2013.
The figures are consolidated estimates for all private property and casualty insurers based on reports accounting for at least 96 percent of all business written by private US property and casualty insurers.
