US P&C insurance industry continues underwriting losses

Written by Dan McGrath

15/09/2023

The US property and casualty (P&C) industry has continued to generate significant underwriting losses in the first half of 2023, despite strong premium growth, Fitch Ratings has found.

The credit ratings firm has said that these results are set to improve in the second half of the year as pricing increases continue to take hold.

However, uncertainty remains regarding future catastrophic losses, effects of inflation on loss costs, and loss reserve experience.

With higher natural catastrophic losses and a lack of improvement in personal auto results, Fitch said the industry will find it hard to match the 102.8% combined ratio posted at the end of 2022.

As a result, the industry underwriting CR was driven to 104.4% in the first six months of 2023, compared to a CR of 100% in mid-year 2022.

The results released by Fitch showed that the P&C industry’s net statutory earnings declined to $9bn in the first half of the year, with a 1.8% annualised return on surplus. Statutory earnings fell by 73% year-on-year, and 63% excluding a one-time $10.8bn investment distribution to a Berkshire Hathaway insurance subsidiary.

However, industry policyholders’ surplus increased by 5.4% in the first half of the year, exceeding $1trn, despite the sharp drop in earnings as the equity market recovery contributed to large unrealised investment gains.

Furthermore, written premium growth also remained high with direct written payments (DWP) increasing by 8.6% and written net premiums also rising by 8% year-on-year. There were also sharp increases in auto and homeowners’ premium rates in many jurisdictions, which led to personal lines DWP increasing by 11% for the period.

Fitch’s sector outlook on US P&C insurance is neutral, with results expected to be stable to improving, with a gradually emerging recovery in personal auto, continued stability in commercial lines underwriting and investment income growth.

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