OLDWICK, N.J.--(BUSINESS WIRE)--The year-end statutory filings for the U.S. property/casualty (P/C) industry showed a year-over-year 69% increase in net income to $59.2 billion in 2019, owing to lower losses from catastrophic events, favorable development of prior years’ loss reserves and higher net investment income, according to an AM Best special report.
The new Best’s Special Report, titled, “Generally Favorable 2018 Statutory Results for Property/Casualty Insurers,” states that net premiums written (NPW) also rose significantly, due in part to the 2017 Tax Cut and Jobs Act (TCJA), as changes in accounting rules for internal transactions with foreign affiliates led to revisions and terminations of reinsurance agreements with off-shore affiliates. AM Best estimates that about half of the 10.8% increase in NPW to $617.4 billion in 2018 resulted from these changes, with rate and exposure changes also contributing to NPW growth.
Incurred losses grew 4.4%, reflecting significantly lower catastrophe losses that were more than offset by higher retained losses because of reinsurance changes. The lower catastrophe levels also drove a slight decline in loss-adjustment expenses, which decreased by 0.5% in 2018. Underwriting expenses for 2018 increased 10.7%, outweighing a 9.8% increase in net premiums earned (NPE), resulting in an underwriting loss of $2.9 billion. Despite the loss, it marked a significant improvement from the $25.3 billion underwriting loss in 2017, a year greatly affected by natural disasters. The statutory combined ratio dropped to 99.6 from 104.6 in the previous year despite the underwriting loss, reflecting the extent to which NPW exceeded NPE in the year.
The P/C industry’s net investment income increased by 14% in 2018; however, unrealized investment losses of $43.8 billion, driven primarily by equity market declines during the fourth quarter, resulted in a slight decline in policyholders’ surplus for the year.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=287006.
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