Property/casualty sector sees another profitable yearPosted On: May. 5, 2016 12:00 AM CST
The U.S. property/casualty industry marked its third straight year of profitability in 2015 with $6.2 billion in underwriting income, A.M. Best said Wednesday, but pre-tax operating and net income dropped from the prior year due to lower underwriting income and an 11.2% decline in net investment income.
The reported combined ratio for the industry was 98.3, a slight deterioration from 97.4 in 2014, A.M. Best said. The combination of lower net income and a slip in the industry's accumulated unrealized gain position reduced policyholders' surplus by $1.5 billion to $688.6 billion at year-end 2015, a 0.2% decline. After-tax return on equity also declined to 8.1% from 9.2% in 2014, driven by the lower level of net income.
Net premiums written continued growing in 2015, up 3.4% to $519 billion from the prior year. However, A.M. Best said, this was the second year of declining premium growth since the peak growth figure of 4.7% in 2013.
Compared with more recent years, more companies said they were making larger reinsurance purchases, A.M. Best said, adding more layers at the top of their programs or filling out layers where the company previously retained some risk. While these changes were primarily notable in property reinsurance programs, casualty treaties are also being affected by these trends. These actions would have the effect of reducing the growth of net premiums written.
“Catastrophe activity in the U.S. remained relatively benign,” A.M. Best said, “with catastrophe losses adding just 3.5 points to the industry combined ratio in 2015, down from 4 points in the prior year. Despite this reduction in catastrophe losses, the industry's accident year combined ratio increased by 0.5 points, while the benefit from favorable development of prior accident year loss reserves declined.”