ISO, NAII Report First-Quarter 1997 Property/Casualty Industry Financial Results

NEW YORK, June 4, 1997 — The U.S. property and casualty insurance industry's consolidated net income after tax rose to $10.0 billion for first-quarter 1997, a 32.6 percent increase from $7.5 billion in the first quarter of 1996.

Net income in this year's first quarter included pre-tax operating income of $10.1 billion and realized capital gains of $2.2 billion. The industry incurred $2.3 billion in income taxes in first-quarter 1997, compared with $1.7 billion in the first quarter 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 pre-tax operating income of $10.1 billion was more than double the first-quarter 1996 pre-tax operating income of $4.4 billion. Property/casualty insurers' first-quarter 1997 operating income included a pre-tax underwriting loss of $1.5 billion, pre-tax net investment income of $11.4 billion, and miscellaneous income of $0.1 billion.

The industry's $1.5 billion underwriting loss in the first quarter of 1997 was less than a third of its $4.9 billion underwriting loss in first-quarter 1996. According to the Property Claim Services Division of the American Insurance Services Group, Inc., catastrophe losses for first-quarter 1997 totaled only $0.9 billion, compared with $2.6 billion in first-quarter 1996. The first-quarter 1997 underwriting loss reflects $0.5 billion of premiums returned to policyholders as dividends, virtually unchanged from 1996.

As a result of improved loss experience in the first quarter of 1997, the combined ratio — a measure of losses and other expenses per dollar of premium — was 101.2, the best quarterly combined ratio for the industry since 1979.

The first-quarter 1997 underwriting loss was 2.3 percent of earned premiums of $66.3 billion. This percentage was lower than the 7.6 percent underwriting loss on earned premiums of $64.6 billion for the first quarter of 1996.

Net investment income of $11.4 billion (primarily dividends earned from stocks and interest on bonds) was up 23.1 percent from $9.3 billion in first-quarter 1996. Approximately $2.0 billion of the $2.1 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, investment income in first-quarter 1997 was 2.1% above investment income in first-quarter 1996.

Realized capital gains of $2.2 billion in first-quarter 1997 were less than half of the unusually large $4.8 billion in realized gains in first-quarter 1996, and 15.3% less than the realized capital gains in the fourth-quarter of 1996. Net investment income together with realized capital gains brought the industry's total pre-tax net investment gain for the first-quarter of 1997 to $13.7 billion, down 2.9 percent from $14.1 billion in first-quarter 1996.

Net written premium for first-quarter 1997 totaled $69.0 billion, up 3.3 percent from $66.8 billion in first-quarter 1996. This compares with first-quarter written premium growth of 3.4 percent in 1996 over 1995, and full-year written premium growth of 3.5 percent for 1996 over 1995.

The industry's consolidated surplus — its assets minus liabilities — increased $9.9 billion, or 3.8 percent, to $266.3 billion as of March 31, 1997, from $256.5 billion at year-end 1996. Additions to surplus included $10.1 billion of operating income, $1.4 billion of unrealized capital gains, $2.2 billion of realized capital gains, and $0.8 billion of new funds. Decreases from surplus included $2.1 billion of stockholder dividends, $2.3 billion of income taxes, and $0.3 billion in miscellaneous surplus changes.

OPERATING RESULTS FOR 1997 AND 1996
($Millions)

FIRST QUARTER 1997 1996
NET WRITTEN PREMIUM 69,023 66,827
NET EARNED PREMIUM 66,298 64,593
INCURRED LOSS & LOSS ADJUSTMENT EXPENSE 49,149 51,685
STATUTORY UNDERWRITING GAIN (LOSS) (972) (4,396)
POLICYHOLDERS' DIVIDENDS 523 534
NET UNDERWRITING GAIN (LOSS) (1,495) (4,930)
PRE-TAX OPERATING INCOME 10,064 4,426
NET INVESTMENT INCOME EARNED 11,421 9,279
NET REALIZED CAPITAL GAIN (LOSS) 2,246 4,793
NET INVESTMENT GAIN 13,667 14,072
NET INCOME AFTER TAXES 10,001 7,541
SURPLUS (CONSOLIDATED) 266,348 236,525
COMBINED RATIO, POST-DIVIDENDS 101.2% 106.7%
 

Release: Immediate

Contacts:
Giuseppe Barone / Erica Helton
MWW Group (for ISO)
201-507-9500
gbarone@mww.com / ehelton@mww.com