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Property/casualty insurers weather rough fourth quarter

Posted On: May. 16, 2016 12:00 AM CST

The U.S. property/casualty insurance industry's net income for the fourth quarter of 2015 fell 30.3% from the corresponding period a year earlier to $12.59 billion, according an analysis released Monday by Verisk Analytics Inc.'s Insurance Services Office unit and the Property Casualty Insurers Association of America.

According to “Property/Casualty Insurance Results: 2015,” net written premium for the insurers tracked by the two organizations grew 1.3% in the last quarter of last year to $121.28 billion, while the combined ratio deteriorated to 100.5% from 94.9%.

The insurers surveyed accounts for at least 96% of the business written by U.S. property/casualty underwriters.

Among other things, a jump in catastrophe losses marked the fourth quarter. Direct losses from catastrophes affecting the United States rose 200% from the same period a year earlier to $2.1 billion. Statutory underwriting gains fell 80.3% to $1.58 billion. The drop reflected in part a $3.6 billion reserve charge taken by American International Group Inc.

The fourth-quarter results “showed troubling signs of deterioration, with a significant slowdown in premium growth and the combined ratio climbing back over 100%,” Robert Gordon, Washington-based senior vice president for policy development and research at PCI, said in a statement. “While the industry continues to be well-capitalized and well-prepared to pay future claims, we are closely monitoring adverse auto frequency and severity trends, as well as what are expected to be active wildfire and hurricane seasons with more volatile weather patterns as El Nino weakens and transitions to a La Nina.”

For the year as a whole, net income after taxes rose 1.3% to $56.62 billion. Net written premiums grew 3.4% to $513.96 billion, and the combined ratio deteriorated to 97.8% from 97.0%.

“It's too early to tell whether the deterioration of underwriting results this past year starts a trend, but we are seeing heightened loss ratios for auto liability — both personal and commercial,” Beth Fitzgerald, Jersey City, New Jersey-based president of ISO Solutions, said in the statement. “Likely factors behind the loss ratio increases for automobile insurance include economic growth and low gas prices, which are putting more drivers on the roads, and increases in automobile repair costs. The slowdown of net written premium growth for the entire industry could indicate an even more challenging environment for insurers in the near future. Only those insurers best equipped for underwriting will likely see success in the future.”