CHICAGO--(BUSINESS WIRE)--U.S. Property/casualty insurers' operating performance held relatively steady in the first half of 2014, according to a new Fitch Ratings report. Benefits from premium rate increases over the past few years helped offset modestly higher catastrophe losses and a marginally lower contribution from loss reserve releases.
Aggregate operating earnings for a group of 48 property/casualty (re)insurers increased by 4.2% over the first half of 2013. Operating return on average equity dipped slightly to 8.5% from 8.9% in the prior year as strong growth in shareholders' equity outpaced the increase in operating earnings. Only 21 of the 48 companies reported a higher year-over year operating ROE.
The underwriting combined ratio deteriorated modestly, but the group maintained solid underwriting profitability. The aggregate combined ratio rose by 0.6 percentage points to 94.2%, primarily due to increased catastrophe losses. Regional insurers had the greatest decline in underwriting performance from year to year with a 5.6-point increase in the sub-segments calendar-year combined ratio.
Only eight companies of these 48 companies failed to report an underwriting profit in the first six months of 2014. The accident-year loss ratio (excluding catastrophe losses) was virtually unchanged at 92.1%.
Latest indications are that rates have flattened in many segments and commercial property rates are declining. Reinsurance markets experienced significant pricing declines, especially in property catastrophe lines, relating to recent strong sector performance and heightened competition from nontraditional capital sources. As pricing turns less favorable, premium growth is more reliant on exposure growth tied to macroeconomic forces, and core underwriting performance is likely to deteriorate in 2015.
Despite expected declines in near-term profitability, Fitch expects the P/C industry's overall profile to remain broadly supportive of current ratings.
The full report, 'U.S. Property/Casualty Insurers' Midyear 2014 Financial Results' is available at 'www.fitchratings.com' under the following headers:
Sectors >> Financial Institutions >> Insurance >> Research
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: U.S. Property/Casualty Insurers' Midyear 2014 Financial Results