P/C Net Income Soared in Much of 2015; Investments Remained a Struggle

February 9, 2016

Finance, financial charts, line graphs, accounting, incomeProperty/casualty insurers saw their net income and profitability soar during the first nine months of 2015, though the challenging investment environment reduced yields.

Those findings are part of a new report from ISO (part of Verisk Analytics), and the Property Casualty Insurers Association of America. The report’s authors caution, however, that the market is turning in some key areas.

First, the 2015 nine-month results:

Net investment income ticked higher to $34.8 billion for Q1-3 in 2015, versus $34.5 billion the previous year. Realized capital gains ticked slightly higher to $8.9 billion, compared to $8.8 billion in the first three quarters of 2014. As a result, net investment gains for the industry hit $43.7 billion for the first nine months of 2015. However, the first three quarters of 2015 reflect a difficult investment climate. They collectively had a 3.1 annual investment yield during that period, which is “significantly below long-term averages” and not likely to improve for a while, ISO Solutions President Beth Fitzgerald said in prepared remarks.

Robert Gordon, PCI’s senior vice president for policy development and research, noted that surplus and premium to surplus continued to “hover near historic levels” during the first nine months of 2015.

“However, premium growth continues to be sluggish for personal lines,” Gordon cautioned in prepared remarks. “Additionally, some industry statistics we’re monitoring indicate that the combined ratio for personal auto insurance has worsened, driven by increases in both accident severity and frequency.”

The report’s assessment of Q3 2015 results mirrors the favorable numbers from the year’s first three quarters. Among the results:

Source: ISO/Verisk, Property Casualty Insurers Association of America