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U.S. property/casualty insurers reported a 21.6% decline in net income to $25.0 billion in the first half of this year, as realized capital gains fell $5.5 billion amid the COVID-19 pandemic, A.M. Best Inc. said in a report Tuesday.
Premium credits issued to policyholders in the second quarter due to pandemic-related exposure declines because of stay-at-home orders and government-ordered business closures pushed P/C insurer underwriting and dividend expenses higher in the first half, A.M. Best said.
The P/C industry’s first-half underwriting expenses rose by 5.5% as some insurers recorded policyholder credits as an expense rather than a premium reduction, Best said.
Policyholder dividends increased by $3.4 billion from the prior-year period as several insurers provided refunds in the form of dividend payments, Best said in the report.
Premium credits mostly impacted the personal lines insurance segment, but while expenses increased, the segment’s loss ratio for the first half of the year improved by nearly six points, A.M. Best said.
Commercial lines insurers also benefited from a decline in auto accident frequency during the pandemic, but this was offset by higher catastrophe losses and the impact of pandemic-related claims on loss reserves, Best said.
The commercial lines segment loss ratio increased by over four percentage points in the first half, compared with the same period of 2019, Best said.
The P/C industry’s first-half combined ratio remained relatively flat at 97.6%, but catastrophe losses accounted for 6.5 points, up from an estimated 4.5 points in the prior-year period, Best said.