Private U.S. property/casualty insurers produced a record surplus in the 2019 first half, driven up by carriers’ income and unrealized capital gains, Verisk and the American Property Casualty Insurance Association determined in a new report.

The surplus reached $802.2 billion in the 2019 first half, the report found, reflecting a $60.1 billion gain in 2019 as the stock market recovered from a significant downturn at the end of 2018. The prior record, set on Sept. 30, 2018, was $781.6 billion.

The industry’s net income after taxes and underwriting gains remained strong despite small declines compared with the prior year. Net income after taxes declined to $32.8 billion for the first half of 2019 from $34.0 billion a year earlier, and net underwriting gains declined to $5.4 billion from $6.0 billion in first-half 2018.

Net written premium growth slowed to 1 percent in first-half 2019, after jumping 13.2 percent a year earlier; both were mostly the result of one-time increases in net written premiums caused by the changes multiple insurers made to their reinsurance arrangements in 2018. Net earned premiums grew 3.8 percent.

Insurers’ combined ratio deteriorated to 97.3 in first-half 2019 from 96.2 a year earlier. Net losses and loss adjustment expenses (LLAE) from catastrophes declined to $13.7 billion for first-half 2019 from $14.7 billion a year earlier.

“The property/casualty industry posted stable but unremarkable financial results for the first half of 2019,” said Robert Gordon, senior vice president for policy, research and international, at APCIA. “Incurred losses and loss adjustment expenses increased 5.7 percent, while net written premium growth settled back down from a 13.2 percent increase in the first half of 2018 to only 1 percent growth in the first half of 2019. The combined ratio increased to 97.3, and net income after taxes actually declined by 3.5 percent. The decline in net income was offset by a swing in unrealized capital gains, from an $8.0 billion loss to a $41.6 billion gain as the equity markets recovered from year-end 2018 losses. Insurers headed into the third quarter watchful of the hurricane and wildfire seasons but well positioned to provide the necessary financial security for their policyholders.”

Second-Quarter Results

Insurers’ net income after taxes fell to $14.9 billion in second-quarter 2019 from $16.9 billion in second-quarter 2018, and their combined ratio deteriorated to 98.9 in second-quarter 2019 from 97.7 a year earlier.

Net written premiums rose $4.9 billion, or 3.1 percent, to $160.3 billion in second-quarter 2019 from $155.5 billion in second-quarter 2018.

Net underwriting gains deteriorated to just $0.1 billion for second-quarter 2019 from $1.9 billion for second-quarter 2018.

Source: Verisk, APCIA