The U.S. property/casualty insurance industry's net income for the fourth quarter of 2013 soared to $20.76 billion from $7.25 billion during the same period a year earlier, according to a survey released Monday.
Net written premiums for the fourth quarter of 2013 for the industry rose 5.8% year over year to $114.24 billion, according to the survey, which was undertaken by Verisk Analytics Inc.'s Insurance Services Office unit and the Property Casualty Insurers Association of America. Net underwriting gains for the quarter reached $5.02 billion compared with a loss of $9.19 billion during the same period a year earlier.
The survey found that for the fourth quarter, the industry's combined ratio improved to 97.1% from 109.6%.
For 2013 as a whole, the industry's net income rose 81.9% to $63.78 billion, while net written premiums increased 4.6% to $477.68 billion. The industry posted a net underwriting gain of $15.51 billion compared with a $15.37 billion loss during 2012.
The combined ratio for the year improved to 96.1% from 102.9%.
Policyholder surplus for the year rose 11.3% to a record $653.35 billion.
“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, in a statement accompanying the results.
“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 Sept. 11 terrorist attack occurs.”
“The swing to net gains on underwriting in 2013 is certainly welcome news for insurers, whose net investment income — primarily interest on bonds and dividends from stocks — peaked at $55.1 billion in 2007 but totaled just $47.4 billion last year as a consequence of the historically low investment yields brought about by the financial crisis, the Great Recession, and the economy's slow recovery from those events,” said Michael R. Murray, ISO's assistant vice president for financial analysis, in the statement.
“Insurers earned net gains on underwriting in just 12 of the 55 years from the start of ISO's data in 1959 to 2013, with insurers posting cumulative net losses on underwriting amounting to $485.9 billion during that period,” added Mr. Murray.
“But with much of the improvement in underwriting results last year attributable to special developments including relatively benign weather, a sharp drop in catastrophe losses and increases in reserve releases, one has to wonder just how sustainable the net gains on underwriting will prove to be,” he said.
The figures are consolidated estimates for all private U.S. property/casualty insurers based on reports accounting for at least 96% of all business written by private insurers.