JERSEY CITY, N.J., June 26, 2017 — The private U.S. property/casualty insurance industry saw its net income after taxes drop to $7.7 billion in first-quarter 2017 from $13.4 billion in first-quarter 2016—a 42.2 percent decline—and its overall profitability as measured by its annualized rate of return on average policyholders’ surplus fall to 4.4 percent from 7.9 percent, according to ISO, a Verisk Analytics (Nasdaq:VRSK) business, and the Property Casualty Insurers Association of America (PCI).
The industry experienced $7.3 billion in direct catastrophe losses—the highest first-quarter catastrophe losses since the 1994 Northridge earthquake and $2.3 billion above the direct catastrophe losses for first-quarter 2016. Insurers’ combined ratio deteriorated to 99.6 percent for first-quarter 2017 from 97.4 percent for first-quarter 2016.
Insurers also saw some improvement from a year earlier. Net written premium growth accelerated to 4.0 percent for first-quarter 2017 from 3.2 percent for first-quarter 2016. Net investment gains increased by $1.2 billion to $14.4 billion in first-quarter 2017 from $13.2 billion for first-quarter 2016. The industry’s surplus reached a new all-time high value of $709.0 billion as of March 31, 2017, increasing $8.1 billion from $700.9 billion as of December 31, 2016.
“Three major wind and thunderstorm events each resulted in more than $1 billion in damages in first-quarter 2017. That’s the first time we’ve seen three events of that magnitude in the first quarter in more than 60 years. Fortunately, insurers are well capitalized, and short-term volatility in catastrophe losses is not affecting their ability to provide coverage and pay claims. They’re also seeing some acceleration in premiums and investment income. However, to remain profitable and provide appropriate returns on their capital, insurers need to plan for the long term and continue to engage in disciplined underwriting based on robust data and analytics.”
Beth Fitzgerald, Senior Vice President, Industry Engagement, ISO
“Industry operating results continued to deteriorate in the first quarter of 2017. The combined ratio worsened to just better than break-even, underwriting gains shifted to net losses, and pretax operating income plummeted 60 percent as compared with the first quarter of 2016. Additional industry data shows personal auto loss ratio improvement in first-quarter 2017, although the rolling four-quarter average is still worse than the rolling average at the first quarter of last year. Unlike first-quarter personal auto improvement, personal property lines losses increased, impacted by an almost 50 percent increase in catastrophe losses in first-quarter 2017 compared with the same period in 2016, compounding the 2015–2016 increase of similar proportion. Policyholder surplus increased slightly in real terms, and the overall deterioration in results in first-quarter 2017 is far less remarkable excluding a special reinsurance transaction that reduced other income and pretax operating income by $6.3 billion.”
Robert Gordon, PCI’s Senior Vice President for Policy Development and Research
 Net investment gains equal the sum of net investment income and realized capital gains (or losses) on investments.
 Policyholders’ surplus is insurers’ net worth measured according to Statutory Accounting Principles.
View the full report from ISO and PCI here.
Since 1971, ISO has been a leading source of information about property/casualty insurance risk. For a broad spectrum of commercial and personal lines of insurance, ISO provides statistical, actuarial, underwriting, and claims information and analytics; compliance and fraud identification tools; policy language; information about specific locations; and technical services. ISO serves insurers, reinsurers, agents and brokers, insurance regulators, risk managers, and other participants in the property/casualty insurance marketplace. ISO is a Verisk Analytics (Nasdaq:VRSK) business. For more information, please visit www.verisk.com/iso.
PCI is composed of nearly 1,000 member companies, representing the broadest cross section of insurers of any national trade association. PCI members write more than $183 billion in annual premium, 35 percent of the nation’s property/casualty insurance. Member companies write 42 percent of the U.S. automobile insurance market, 27 percent of the homeowners market, 32 percent of the commercial property and liability market, and 34 percent of the private workers’ compensation market. For more information, visit www.pciaa.net.
Jeffrey Brewer for PCI
Loretta Worters for I.I.I.