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Property/casualty insurer profits nosedive in first quarter

Posted On: May. 24, 2017 2:15 PM CST

The U.S. property/casualty sector saw a sharp decline in net income during the first quarter of 2017 despite a rise in net premiums written, according to a report issued Wednesday by A.M. Best Co. Inc.

First-quarter net income for the sector plunged 45.2% to $7.3 billion from the year-ago period even as net premiums written grew 4.8% to $132.7 billion, according to the report, “A.M. Best First Look: 1Qtr 2017 U.S. Property/Casualty Financial Results.”

Dragging down results was a quarterly net underwriting loss of $841.5 million, the first such quarter loss in five years, compared with a net underwriting profit of $2.0 billion in the year-ago period. 

The first-quarter combined ratio for the sector deteriorated 2 points to 99.7% from 97.7% during the first three months of 2016. First-quarter estimated property/casualty catastrophe losses jumped 48% to $7.6 billion, said the report, based on responses from A.M. Best’s quarterly survey.

While net investment income grew 9.5% to $11.9 billion from the prior-year period, the report notes that “nearly half of that was offset by a $5.9 billion loss in other income, reflecting the impact of a retroactive reinsurance contract entered into in February 2017 by AIG and National Indemnity” in which National Indemnity Co. would provide $20 billion of aggregate cover on much of American International Group Inc.’s commercial book of business, covering losses unpaid as of Jan. 1, 2016.

The industry surplus, however, grew to a record $696.9 billion at the end of March, said Best, despite the decline in net income.

The information in the report is from companies whose three months 2017 interim period statutory statements were received as of May 17, 2017, according to Best, representing an estimated 96% of total industry net premiums written and 94% of policyholder surplus.