Profitability up for U.S. property and casualty industry in first half of year

Profitability in the U.S. property and casualty industry were up in the first half of 2013, according to an analysis of the latest figures released by the Property Casualty Insurers Association of America and ISO, part of Verisk Analytics.

The rebound was driven by growth in premiums, lower catastrophe losses and a “favorable prior year reserve development,” Dr. Robert Hartwig, president of the Insurance Information Institute, wrote in an analysis.

“The effect: the industry combined ratio fell to 97.9 in the first half of 2013 from 101.9 in the first half of 2012—leading to an underwriting profit of $2.3 billion—much needed in an era of persistent, ultra-low interest rates,” he wrote.

Overall net income after-tax increased to $24.5 billion in the first half of the year from $17.2 billion in the comparable period last year. Net written premiums also rose, from

“Top line growth is also a consistent and meaningful contributor to improved profitability,” Hartwig wrote. “Net written premiums were up 4.5 percent during the half, up from 3.7 percent gain recorded in first half of 2012 and 4.7 percent in the second quarter, marking the thirteenth consecutive quarter of growth and the longest continuous period of growth in nearly a decade.”

Low interest rates remain an ongoing challenge, Hartwig noted. Corporate bond yields for the first half of 2013 were also “dismal,” while stock dividends were up nearly 20 percent, he wrote.

“The $26.9 billion increase in policyholders’ surplus to a record-high $614 billion at June 30, 2013, is a testament to the strength and safety of insurers’ commitment to policyholders,” Robert Gordon, vice president for policy development and research with the PCIAA noted in a statement. “Insurers are strong, well capitalized, and well prepared to pay future claims.

“Despite expert predictions that the 2013 hurricane season would be very active, we have been lucky so far,” he also noted.

“Superstorm Sandy didn’t strike until the last days of October 2012, and data from ISO’s Property Claim Services unit shows there have been 15 catastrophic fourth-quarter hurricanes since 1950, with 3 of those 15 occurring in the second half of November.

This means that all of us — insurers, policyholders, first responders, and federal, state, and local officials — must be prepared to take the steps necessary to minimize the hardship and human suffering that will occur when a major storm makes landfall. Investing now in preparation and mitigation will save lives and reduce losses.”