Property/Casualty insurance industry’s net income drops 29.2 percent in first-half 2017

October 6, 2017 / 2 min read

Flooding from Irma — Flooding from Hurricane Irma. Photo courtesy of Geomni. The high level of the industry surplus as of June 30 will be important for an industry facing significant losses from third-quarter catastrophes, which included Irma.

The private U.S. property/casualty insurance industry saw its net income after taxes drop to $15.5 billion in first-half 2017 from $21.8 billion in first-half 2016—a 29.2 percent decline—and its overall profitability as measured by its annualized rate of return on average policyholders’ surplus fall to 4.4 percent from 6.4 percent.

The industry experienced $17.1 billion in direct catastrophe losses—$3.2 billion above the direct catastrophe losses for first-half 2016. Insurers’ combined ratio deteriorated to 100.7 percent for first- half 2017 from 99.7 percent for first-half 2016.

Net written premium growth recovered to 4.1 percent for first-half 2017, the same growth rate as for first-half 2015 and an improvement from 3.1 percent for first-half 2016. Net investment gains increased to $27.1 billion in first-half 2017 from $26.6 billion for first-half 2016. The industry’s surplus reached a new all-time-high value of $717.0 billion as of June 30, 2017, increasing $16.1 billion from $700.8 billion as of December 31, 2016.

Second-quarter results

Results graphic By the numbers graphic Insurers’ net income after taxes fell to $7.6 billion in second-quarter 2017 from $8.4 billion in second-quarter 2016, but their combined ratio declined slightly to 101.9 percent in second-quarter 2017 from 102.0 percent a year earlier.

Their annualized rate of return on average surplus dropped to 4.3 percent in second-quarter 2017 from 4.9 percent a year earlier.

Net written premiums rose 4.2 percent in second-quarter 2017, compared with 3.0 percent in second-quarter 2016.

The high level of the industry surplus as of June 30 is important, as the industry is facing significant losses from third-quarter catastrophes, including Hurricanes Harvey, Irma, and Maria.

Insurers and reinsurers have made use of sophisticated catastrophe management models and alternative risk transfers to properly manage their exposure, but the devastation caused by the storms has highlighted the increasing severity of natural disasters.

Improved post-event tools and processes such as aerial imagery can assist the industry with the challenge of speeding up recovery to insureds. Another challenge is to expand the breadth of insurance to cover more of the losses, such as flood. Verisk is working hard to provide the necessary resources to meet insurer needs.