Insurers’ overall profitability as measured by their rate of return on average policyholders’ surplus remained virtually unchanged at 8.4 percent, even though their combined ratio deteriorated to 97.8 percent from 97.0 percent and their net underwriting gains declined to $8.7 billion from $12.2 billion. Insurers’ net investment income increased to $47.2 billion in 2015 from $46.4 billion a year earlier, but realized capital gains decreased to $9.4 billion from $10.3 billion, resulting in $56.6 billion in net investment gains for 2015, essentially unchanged from 2014.
“The property/casualty insurance industry’s surplus remained near record levels in 2015, with overall insurer results consistent with those of recent years,” said Robert Gordon, PCI’s senior vice president for policy development and research. “However, fourth-quarter results showed troubling signs of deterioration, with a significant slowdown in premium growth and the combined ratio climbing back over 100 percent. While the industry continues to be well capitalized and well prepared to pay future claims, we are closely monitoring adverse auto frequency and severity trends as well as what are expected to be active wildfire and hurricane seasons with more volatile weather patterns as El Niño weakens and transitions to a La Niña.”
“It’s too early to tell whether the deterioration of underwriting results this past year starts a trend, but we are seeing heightened loss ratios for auto liability—both personal and commercial,” said Beth Fitzgerald, president of ISO Solutions. “Likely factors behind the loss ratio increases for automobile insurance include economic growth and low gas prices, which are putting more drivers on the roads, and increases in automobile repair costs. The slowdown of net written premium growth for the entire industry could indicate an even more challenging environment for insurers in the near future. Only those insurers best equipped for underwriting will likely see success in the future.”
The property/casualty insurance industry’s consolidated net income after taxes fell to $12.6 billion in fourth-quarter 2015 from $18.1 billion in fourth-quarter 2014.
Property/casualty insurers’ annualized rate of return on average surplus dropped to 7.5 percent in fourth-quarter 2015 from 10.7 percent a year earlier.
Net written premiums rose $1.6 billion, or 1.3 percent, to $121.3 billion in fourth-quarter 2015 from $119.7 billion in fourth-quarter 2014. The industry’s combined ratio deteriorated to 100.5 percent in fourth-quarter 2015 from 94.9 percent in fourth-quarter 2014.
To view the full report from ISO and PCI, click here.
Since 1971, ISO has been a leading source of information about property/casualty insurance risk. For a broad spectrum of commercial and personal lines of insurance, ISO provides statistical, actuarial, underwriting, and claims information and analytics; compliance and fraud identification tools; policy language; information about specific locations; and technical services. ISO serves insurers, reinsurers, agents and brokers, insurance regulators, risk managers, and other participants in the property/casualty insurance marketplace. ISO is a Verisk Analytics (Nasdaq:VRSK) business. For more information, please visit www.verisk.com/iso.
PCI is composed of nearly 1,000 member companies, representing the broadest cross section of insurers of any national trade association. PCI members write more than $183 billion in annual premium, 35 percent of the nation’s property casualty insurance. Member companies write 42 percent of the U.S. automobile insurance market, 27 percent of the homeowners market, 32 percent of the commercial property and liability market, and 34 percent of the private workers' compensation market. For more information, visit www.pciaa.net.
Giuseppe Barone for ISO
Jeffrey Brewer for PCI
Loretta Worters for I.I.I.