NEW YORK, Sept. 8, 1997 — The U.S. property and casualty insurance industry's consolidated net income after tax rose to $18.1 billion in the first six-months of 1997, a 53.7 percent increase from $11.8 billion in the first six-months of 1996.
Net income in the first half of 1997 included operating income of $18.8 billion and realized capital gains of $3.9 billion. The industry incurred $4.5 billion in income taxes in the first half of 1997, 69.3 percent more than the $2.7 billion in income taxes incurred in the first half of 1996.
The figures were released by Insurance Services Office, Inc. (ISO) and the National Association of Independent Insurers (NAII). The figures are consolidated estimates for the entire industry based on the reports of insurers that account for 96 percent of the country's property/casualty insurance business.
The industry's $18.8 billion in pre-tax operating income through six-months 1997 was 115.1 percent more than its $8.7 billion in pre-tax operating income during the corresponding portion of 1996. Property/casualty insurers' first-half 1997 operating income included a pre-tax underwriting loss of $2.4 billion and pre-tax net investment income of $21.2 billion.
The industry's $2.4 billion underwriting loss in the first-half was 74.1 percent less than its $9.3 billion underwriting loss during the same period in 1996. According to the Property Claim Services Division of the American Insurance Services Group, Inc., catastrophe losses for first half 1997 totaled only $1.8 billion, compared with $4.3 billion in first half 1996. As a result of improved loss experience in the first half of 1997, the combined ratio — a measure of losses and other expenses per dollar of premium — was 100.8, the best first-half combined ratio for the industry for at least the past 15 years.
The underwriting loss for first half 1997 was 1.8 percent of earned premiums of $134.1 billion. This percentage was lower than the 7.1 percent underwriting loss on earned premiums of $129.6 billion for first half 1996.
The first half 1997 underwriting loss reflected $1.2 billion of premiums returned to policyholders as dividends, an increase of $0.1 billion from $1.1 billion in first half of 1996.
Net written premium for first half 1997 totaled $139.1 billion, up 4.1 percent from $133.6 billion in first half 1996. This compares with first half written premium growth rates of 3.0 percent for 1996 over 1995 and 3.9 percent for 1995 over 1994.
The $21.2 billion of net investment income (primarily dividends earned from stocks and interest on bonds) was up 16.8 percent from $18.1 billion in the comparable 1996 period. Approximately $2.3 billion of the $3.1 billion increase in net investment income was due to large special dividends two property/casualty insurers received from affiliated life insurance companies. Excluding these dividends, net investment income in first half 1997 was 4.4% above net investment income in first-half 1996.
Realized capital gains of $3.9 billion in first half 1997 were down 32.4 percent from $5.7 billion in first half 1996. Net investment income together with realized capital gains brought the industry's total pre-tax net investment gain for first half 1997 to $25.1 billion, up 5.0 percent from $23.9 billion for first half 1996.
The industry's consolidated surplus — its assets minus liabilities — increased $31.3 billion, or 12.2 percent, to $286.8 billion as of June 30, 1997, from $255.5 billion at year-end 1996. Additions to surplus included $18.8 billion of operating income, $17.6 billion of unrealized capital gains, $3.9 billion of realized capital gains, and $1.1 billion of new funds. Charges against surplus included $4.5 billion of income taxes, $4.5 billion of stockholder dividends, and $0.9 billion in miscellaneous surplus changes.
For the second quarter of 1997, the industry's consolidated net after-tax income was $8.2 billion, compared with net income of $4.5 billion in second-quarter 1996 and $9.9 billion of net income in the first quarter of 1997.
Net income for second quarter 1997 consisted of pre-tax operating income of $8.8 billion and $1.7 billion of realized capital gains. The industry incurred $2.2 billion in income taxes in the second quarter of 1997, more than double the $1.0 billion incurred in second quarter 1996.
The industry's second quarter 1997 pre-tax operating income of $8.8 billion compares with pre-tax operating income of $4.4 billion a year ago. The second quarter 1997 operating income consisted primarily of a pre-tax underwriting loss of $0.9 billion and pre-tax net investment income of $9.9 billion.
The second quarter pre-tax underwriting loss of $0.9 billion was 78.4 percent less than the $4.3 billion underwriting loss in the second quarter of 1996. The improvement in underwriting results coincided with a drop in catastrophe losses to $980 million in the second quarter of 1997 from $1.7 billion in the second quarter of 1996, as reported by the Property Claim Services division of the American Insurance Services Group.
The second quarter 1997 underwriting loss represents 1.4 percent of $67.6 billion in earned premiums, down from 6.7 percent of $65.1 billion in earned premiums for the second quarter of last year. The underwriting loss in the second quarter of 1997 included $0.6 billion of premiums returned to policyholders as dividends, up from $0.5 billion in last year's second quarter.
The $9.9 billion of net investment income for the second quarter of 1997 was up 9.9 percent from $9.0 billion in the same period a year ago. Realized capital gains for second quarter 1997 were $1.7 billion, compared with $1.1 billion in second quarter 1996. The industry's pre-tax net investment gain, which combines net investment income and realized capital gains, was $11.6 billion in 1997's second quarter, compared with $10.1 billion in the second quarter of 1996.
Written premiums totaled $69.7 billion for second quarter 1997, up 4.4 percent from $66.8 billion for second quarter 1996. This compares with second-quarter written premium growth rates of 2.5 percent for 1996 over 1995 and 4.3 percent for 1995 over 1994.
OPERATING RESULTS FOR 1997 AND 1996
|NET WRITTEN PREMIUM||139,069||133,581|
|NET EARNED PREMIUM||134,085||129,582|
|INCURRED LOSS & LOSS ADJUSTMENT EXPENSE||98,449||103,244|
|STATUTORY UNDERWRITING GAIN (LOSS)||(1,235)||(8,198)|
|NET UNDERWRITING GAIN (LOSS)||(2,399)||(9,265)|
|PRE-TAX OPERATING INCOME||18,759||8,722|
|NET INVESTMENT INCOME EARNED||21,200||18,147|
|NET REALIZED CAPITAL GAIN (LOSS)||3,877||5,734|
|NET INVESTMENT GAIN||25,077||23,882|
|NET INCOME AFTER TAXES||18,088||11,770|
|COMBINED RATIO, POST-DIVIDENDS||100.8%||106.4%|
|NET WRITTEN PREMIUM||69,681||66,773|
|NET EARNED PREMIUM||67,603||65,076|
|INCURRED LOSS & LOSS ADJUSTMENT EXPENSE||49,152||51,570|
|STATUTORY UNDERWRITING GAIN (LOSS)||(312)||(3,827)|
|NET UNDERWRITING GAIN (LOSS)||(936)||(4,344)|
|PRE-TAX OPERATING INCOME||8,762||4,429|
|NET INVESTMENT INCOME EARNED||9,883||8,991|
|NET REALIZED CAPITAL GAIN (LOSS)||1,694||1,102|
|NET INVESTMENT GAIN||11,577||10,093|
|NET INCOME AFTER TAXES||8,211||4,524|
|COMBINED RATIO, POST-DIVIDENDS||100.6%||106.0%|
Sue McKenna (NAII)
Loretta Worters (III)