P&C insurers in the U.S. to see strong net premium growth this year

Property and casualty insurers in the United States should see strong net premium growth and a “substantially improved” combined ratio this year, according to a new forecast released by investment management firm Conning.

Conning expects net premium for the P&C industry to grow at a rate of 4.6% over 2012 and an improved combined ratio of 101%, according to a company statement.

“Stronger preliminary results for 2012 despite Superstorm Sandy—a 6% return on equity and a 103% combined ratio—reinforce that the effect of price increases and improved underwriting are taking hold throughout the industry, ” Steven Webersen, managing director at Conning noted in a statement.

The company’s forecast is based on sustained pricing increases and the expectation of a normal level of catastrophe losses this year. Conning issues similar industry forecasts quarterly.

For 2014, Conning expects P&C premium growth of 4.8% and 4.9% in 2015.

All lines of insurance showed growth, with the exception of “medical professional liability,” which saw a decrease of about 2% in 2012, Webersen told Canadian Underwriter.

Return on equity is still not as attractive as it could be for the P&C industry, he noted. The continued low interest rate environment continues to be a challenge, he said, noting that investment income decreased about 3% in 2012 over the prior year.

Further, “… a record level of capital in the industry will inhibit further improvements in industry premium growth and pricing necessary to achieve underwriting profitability and a reasonable return on equity,” Stephan Christiansen, managing director at Conning noted in the firm’s statement.

The full forecast and analysis is available to subscribers on Conning’s website.