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Property/Casualty insurers report $1.5 billion net underwriting loss in first-half 2016

Private U.S. property/casualty insurers reported a $1.5 billion net underwriting loss in the first half of 2016—the first year-to-date net underwriting loss in more than three years—and saw their net income after taxes drop to $21.7 billion in first-half 2016 from $31.0 billion a year earlier, according to ISO, a Verisk Analytics business, and the Property Casualty Insurers Association of America (PCI).

Insurers’ combined ratio deteriorated to 99.8 percent in first-half 2016 from 97.6 percent in first-half 2015, and net written premium growth slowed to 3.0 percent in first-half 2016 from 4.1 percent a year earlier. Net investment income dropped to $22.1 billion in first-half 2016 from $23.4 billion a year earlier, and realized capital gains decreased to $4.4 billion from $8.2 billion, resulting in $26.5 billion in net investment gains for first-half 2016, down $5.1 billion from a year earlier.

“The industry’s results continued to worsen in the first half of the year, as insurers reported a first-half net underwriting loss for the first time since 2012 and saw their combined ratio exceed 99 percent. Catastrophe losses remained higher than in previous years. Texas was hit by a hailstorm that has been described as the costliest in the state’s history, and several states in the central United States experienced severe thunderstorms. With interest rates and investment yields remaining low, insurers must find ways to improve operational efficiency while still providing valuable coverage for their policyholders.”

– Beth Fitzgerald, president of ISO Solutions

Direct insured property losses from catastrophes striking the United States totaled $13.5 billion in first-half 2016, up from $10.7 billion a year earlier and above the $11.6 billion average for first-half direct catastrophe losses for the past ten years.

Second-Quarter Results

Insurers’ net income after taxes fell to $8.3 billion in second-quarter 2016 from $12.9 billion in second-quarter 2015, and their combined ratio worsened to 102.1 percent in second-quarter 2016 from 99.4 percent a year earlier.

Their annualized rate of return on average surplus dropped to 4.9 percent in second-quarter 2016 from 7.7 percent a year earlier.

Net written premiums rose 2.9 percent in second-quarter 2016 compared with 4.5 percent in second-quarter 2015. View the full report from ISO and PCI here.

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