ISO, NAII Report Year-End 1996 Property/Casualty Industry Financial Results

NEW YORK, March 25, 1997 — The U.S. property and casualty insurance industry's consolidated net income after tax rose to $24.1 billion in 1996, a 17.0 percent increase from $20.6 billion in 1995.

Net income for 1996 included operating income of $20.2 billion and realized capital gains of $9.6 billion. The industry incurred $5.6 billion in income taxes in 1996, 16.0 percent more than the $4.9 billion in income taxes incurred in 1995.

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 1996 pre-tax operating income of $20.2 billion was 3.6 percent more than its 1995 pre-tax operating income of $19.5 billion. Property/casualty insurers' 1996 operating income included a pre-tax underwriting loss of $16.8 billion and pre-tax net investment income of $37.6 billion.

The industry's $16.8 billion underwriting loss was 4.9 percent less than its $17.7 billion underwriting loss in 1995. The 1996 underwriting loss reflected $2.9 billion of premiums returned to policyholders as dividends, a decrease of $0.5 billion from $3.4 billion in 1995.

The underwriting loss for 1996 was 6.4 percent of earned premiums of $263.7 billion. This percentage was lower than the 7.0 percent underwriting loss on earned premiums of $254.2 billion for 1995.

Net written premium for 1996 totaled $268.8 billion, up 3.5 percent from $259.8 billion in 1995. This compares with written premium growth rates of 3.6 percent for 1995 over 1994 and 3.7 percent for 1994 over 1993.

The $37.6 billion of net investment income (primarily dividends earned from stocks and interest on bonds) was up 2.0 percent from $36.8 billion in 1995. Realized capital gains of $9.6 billion in 1996 were up 59.5 percent from $6.0 billion in 1995. Net investment income together with realized capital gains brought the industry's total pre-tax net investment gain for 1996 to $47.1 billion, up 10.1 percent from $42.8 billion the year before.

The industry's consolidated surplus — its assets minus liabilities — increased $26.5 billion, or 11.5 percent, to $256.5 billion as of December 31, 1996, from $230.0 billion at year-end 1995. Additions to surplus included $20.2 billion of operating income, $13.9 billion of unrealized capital gains, $9.6 billion of realized capital gains, and $4.1 billion of new funds. Decreases from surplus included $8.7 billion of stockholder dividends, $6.9 billion in miscellaneous surplus changes, and $5.6 billion of income taxes.

Fourth-Quarter Results

For the fourth quarter of 1996, the industry's consolidated net after-tax income was $7.2 billion, compared with net income of $5.5 billion in fourth-quarter 1995 and $5.1 billion of net income in the third quarter of 1996.

Net income for fourth-quarter 1996 consisted of pre-tax operating income of $6.4 billion and $2.7 billion of realized capital gains. The industry incurred $1.8 billion in income taxes in the fourth quarter of 1996, more than double the $0.8 billion incurred in fourth-quarter 1995.

The industry's fourth-quarter 1996 pre-tax operating income of $6.4 billion compares with pre-tax operating income of $4.1 billion a year ago. The fourth-quarter 1996 operating income consisted primarily of a pre-tax underwriting loss of $3.5 billion and pre-tax net investment income of $10.4 billion.

The fourth-quarter pre-tax underwriting loss of $3.5 billion was 32.7 percent less than the $5.2 billion underwriting loss in the fourth quarter of 1995. The improvement in underwriting results coincided with a drop in catastrophe losses to $895 million in the fourth quarter of 1996 from $2.6 billion in the fourth quarter of 1995, as reported by the Property Claim Services division of the American Insurance Services Group.

The fourth-quarter loss represents 5.2 percent of $67.5 billion in earned premiums, compared with 8.2 percent of $64.2 billion in earned premiums for the fourth quarter of one year earlier. The underwriting loss in the fourth quarter of 1996 included $1.3 billion of premiums returned to policyholders as dividends, down from $1.5 billion in last year's fourth quarter.

The $10.4 billion of net investment income for the fourth quarter of 1996 was up 10.8 percent from $9.4 billion in the same period a year ago. Realized capital gains for fourth-quarter 1996 were $2.7 billion, compared with $2.2 billion in fourth-quarter 1995. The industry's pre-tax net investment gain, which combines net investment income and realized capital gains, was $13.0 billion in 1996's fourth quarter, compared with $11.5 billion in the fourth quarter of 1995.

Written premiums totaled $65.6 billion for fourth-quarter 1996, up 4.7 percent from $62.6 billion for fourth-quarter 1995. This compares with fourth-quarter written premium growth rates of 3.4 percent for 1995 over 1994 and 2.9 percent for 1994 over 1993.

OPERATING RESULTS FOR 1996 AND 1995
($Millions)

 
   
FULL YEAR
1996
1995
NET WRITTEN PREMIUM 268,809
259,803
NET EARNED PREMIUM 263,708
254,172
INCURRED LOSS & LOSS ADJUSTMENT EXPENSE 206,473
200,566
STATUTORY UNDERWRITING GAIN (LOSS) (13,904)
(14,248)
POLICYHOLDERS' DIVIDENDS 2,926
3,445
NET UNDERWRITING GAIN (LOSS) (16,830)
(17,693)
PRE-TAX OPERATING INCOME 20,161
19,459
NET INVESTMENT INCOME EARNED 37,573
36,834
NET REALIZED CAPITAL GAIN (LOSS) 9,565
5,997
NET INVESTMENT GAIN 47,138
42,831
NET INCOME AFTER TAXES 24,091
20,598
SURPLUS (CONSOLIDATED) 256,477
230,001
COMBINED RATIO, POST-DIVIDENDS 105.9%
106.4%
 
   
FOURTH QUARTER
1996
1995
NET WRITTEN PREMIUM 65,605
62,649
NET EARNED PREMIUM 67,464
64,226
INCURRED LOSS & LOSS ADJUSTMENT EXPENSE 51,404
51,057
STATUTORY UNDERWRITING GAIN (LOSS) (2,238)
(3,719)
POLICYHOLDERS' DIVIDENDS 1,296
1,529
NET UNDERWRITING GAIN (LOSS) (3,534)
(5,248)
PRE-TAX OPERATING INCOME 6,374
4,122
NET INVESTMENT INCOME EARNED 10,388
9,379
NET REALIZED CAPITAL GAIN (LOSS) 2,652
2,153
NET INVESTMENT GAIN 13,040
11,532
NET INCOME AFTER TAXES 7,246
5,463
SURPLUS (CONSOLIDATED) 256,477
230,001
COMBINED RATIO, POST-DIVIDENDS 106.0%
108.8%

Release: Immediate

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

Sue McKenna (NAII)
847-297-7800

Loretta Worters (III)
212-669-9200

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