P/C Q1 Hurt by Catastrophe Losses, Lower Investment Gains: A.M. Best

It is clear now: the jump in catastrophe losses during the 2016 first quarter along with lower investment gains hurt U.S. property casualty insurers’ bottom lines.

While the P/C industry posted a $2.1 billion underwriting gain for the quarter, that is a drop from $3.9 billion over the same period in 2015, A.M. Best said in a new special report. Additionally, the industry combined ratio, while good at 97.4, reflected an uptick over the 95.8 figure from the 2015 first quarter, stemming from flooding and other storm damage.

As well, A.M. Best said that net investment income and realized gains fell during Q1, both due to increased market volatility in the early part of Q1, plus pressure on yields due to continued lower rates on reinvestment.

Other report highlights:

• Pre-tax operating income came in at $13.6 billion, down 11.3 percent from Q1 2015, a result that left pre-tax return on revenue (10.7 percent) dropping to its lowest Q1 level in 5 years.

• Property/casualty insurers saw net premiums written grow at 3.4 percent for the first quarter, above A.M. Best’s projection for the full year, but lower than the 4.2 percent figure from Q1 2015. Personal lines growth remained steady, but commercial lines generated increasing competition

• Direct premiums written grew by 4.4 percent in Q1, versus 4.1 percent in Q1 2015. Private passenger auto liability, auto physical damage and homeowners/farmowners multi-peril produced solid gains, but auto lines grew above the industry average.

The full report is titled: “Resurgent Catastrophe Losses and Declining Investment Income Impact U.S. property/Casualty First Quarter Results.”

Source: A.M. Best