U.S. property/casualty insurers' net income after taxes rose to $10.14 billion in first-quarter 2012, 29.7% over the year-ago period, according to a survey released Wednesday by Verisk Analytics Inc.'s Insurance Services Office Inc. unit and the Property Casualty Insurers Assn. of America.
Net written premiums grew to $112.39 billion in the first quarter, up 3.1% from those of a year earlier. Policyholder surplus grew 3.7% to $570.67 billion from $550.31 billion at the end of 2011.
“Driving the increases in insurers' net income and overall rate of return, net losses on underwriting receded to $200 million in first-quarter 2012 from $4.5 billion in first-quarter 2011,” said the report. That was reflected in an improvement in the industry's combined ratio to 99.0% in the first quarter from 103.3% in the first quarter of last year.
“The improvement in underwriting results is primarily attributable to a drop in net losses and loss adjustment expenses—LLAE—from catastrophes,” said the report. “ISO estimates that insurers' net LLAE from catastrophes fell to $3.4 billion in first-quarter 2012 from $6.6 billion in first-quarter 2011.”
But the report also noted that net investment gains—the sum of net investment income and realized capital gains or losses on investments—dropped 9.2% to $12.34 billion in first-quarter 2012 from that of the same period a year earlier.
“The insurance industry's record-high $570.7 billion in policyholders' surplus as of March 31 is a testament to the resilience of property/casualty insurers throughout the financial crisis and the strength and safety of our commitment to policyholders,” said Robert Gordon, PCI's senior vp for policy development and research, in a statement.
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"The $20.4 billion increase in policyholders' surplus in first-quarter 2012 underscores that insurers are strong, well-capitalized, and well-prepared to pay future claims. Policyholders and regulators can rely on the insurance industry to fulfill its obligations when catastrophes strike, even if the economy remains difficult."
“The 99% combined ratio for first-quarter 2012 is the best first-quarter underwriting result since the 91.6% combined ratio for first-quarter 2007,” said Michael R. Murray, assistant vp-financial analysis at ISO.” The improvement in underwriting results is especially welcome given the toll that long-term declines in interest rates and investment leverage have taken on insurers' ability to use investment earnings to balance underwriting losses.”
The figures are consolidated estimates for all private property/casualty insurers based on reports accounting for at least 96% of all business written by private U.S. property/casualty insurers.
Net income for U.S. property/casualty insurers fell to $19.1 billion in 2011 from $35.2 billion the previous year, according to an analysis released Monday by the Property Casualty Insurers Assn. of America and Insurance Services Office Inc.