OLDWICK, N.J.--(BUSINESS WIRE)--The U.S. property/casualty (P/C) industry posted net underwriting income of $3.9 billion in first-quarter 2018, according to preliminary financial results, a turnaround from the industry’s underwriting loss trend seen in recent years. For the quarter, P/C insurers posted a combined ratio of 94.8, the lowest three-month combined ratio of last five years. This financial review is detailed in a new Best’s Special Report, titled, “First Look—1Q2018 U.S. Property/Casualty Financial Results,” and the data is derived from companies’ three-month 2018 interim statutory statements that were received as of May 17, 2018, representing an estimated 95% of the total property/casualty industry’s net premiums written.
According to the report, increases in net and earned premiums written drove the underwriting improvement, which offset a 3.1% increase in losses and loss adjustment expenses incurred and a 12.7% rise in underwriting expenses and policyholder dividends. Following 2017 when catastrophe caused record insured losses, catastrophe losses returned to a more normalized level in first-quarter 2018. A.M. Best estimates that catastrophe losses accounted for 3.4 points on the three-month 2018 combined ratio, down from an estimated 6.0 points in the prior-year period.
P/C industry results also reflect a $600 million increase in net investment income and a $1.3 billion increase in realized capital gains. In addition, a $5.9 billion loss in other income in 2017 from a retroactive reinsurance contract entered into by American International Group, Inc. and National Indemnity Company was not repeated in the current period. These factors, along with the strong underwriting results, boosted the P/C industry’s net income to $17.4 billion in first-quarter 2018, a $10 billion improvement from the prior-year period.
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