The Property Casualty Insurers Association of America has reported that private U.S. property/casualty insurers’ net income after taxes grew to $63.8 billion in 2013 from $35.1 billion in 2012, with insurers’ overall profitability as measured by their rate of return on average policyholders’ surplus climbing to 10.3 percent from 6.1 percent. At 10.3 percent, insurers’ overall rate of return has risen to its highest level since the 12.4 percent for 2007.
Improvement in underwriting results drove the increases in insurers’ pretax operating income, net income after taxes, and overall rate of return, with insurers’ $15.5 billion in net gains on underwriting in 2013 constituting a $30.9 billion swing from their $15.4 billion in net losses on underwriting in 2012.
The swing to net gains on underwriting is attributable to premium growth and a drop in net losses and loss adjustment expenses (LLAE). Net written premiums climbed 4.6 percent in 2013 to $477.7 billion, and net earned premiums grew 4.2 percent to $467.9 billion. Conversely, net LLAE fell 5.5 percent in 2013 to $315 billion. Those positive developments were partially offset by increases in underwriting expenses and dividends to policyholders, which both rose last year.
Insurers’ overall results for 2013 also benefited from a $4.6 billion increase in net investment gains – the sum of net investment income and realized capital gains (or losses) on investments – which rose to $58.8 billion in 2013 from $54.2 billion in 2012.
“The $66.3 billion increase in policyholders’ surplus to a record-high $653.3 billion at year-end 2013 is a testament to the strength and safety of insurers’ commitment to policyholders. Insurers are strong, well capitalized and well prepared to pay future claims,” said Robert Gordon, PCI’s senior vice president for policy development and research. “The U.S. marketplace emerged relatively unscathed from the hurricane season last year. But advanced risk models show that losses from catastrophic events will continue to increase, and insurers will need to keep on building their financial resources to protect policyholders and bolster economic resiliency before the next major event like Hurricane Katrina or the September 11 terrorist attack occurs. Insurers are taking the steps necessary to secure their financial commitments to consumers. We are also working with homeowners, businesses, and federal, state, and local officials to improve disaster readiness and mitigation to minimize future human tragedy and economic losses. Catastrophe planning and preparation continue to be critical watchwords for 2014.”
