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The U.S. property/casualty insurance industry’s overall financial performance declined in 2018 for the second consecutive year as above-average catastrophe losses hit results, ratings agency A.M. Best said Friday in a report.
Hurricanes Michael and Florence, as well as historic wildfires in California, once again put property/casualty insurers to the test, A.M. Best said in the report.
Expenses slightly outpaced revenues in 2018, as a 3.2% decline in net investment income eclipsed the 3.1% increase in premium revenue, the rating agency said.
Property/casualty insurers reported a 6.8% decline in total operating income to $20.4 billion in 2018, due mainly to an end-of-year downturn in the equity market, the report said.
Tax reform implemented in calendar year 2018 led to the recognition of $17.8 billion in deferred tax asset write-downs, Best said.
The impact of these tax breaks caused a 70% decline in the overall provision for income taxes, resulting in property/casualty insurer net income more than doubling to $17.1 billion, Best said in the report.
A portion of this increase from tax cuts likely will be passed down to shareholders through stock repurchases and dividends during 2019, the report said.
However, in 2018, total dividends and stock repurchases decreased by 95% each, Best said.
A.M. Best Co. Inc. said on Wednesday the number of U.S. property/casualty insurer credit rating downgrades more than doubled in 2018, citing catastrophic weather losses and challenging pricing conditions.