Don’t expect U.S. property/casualty insurer profit to continue its robust climb. Fitch Ratings said that recent natural catastrophes should slow those increases considerably through the second half of 2021.
“The industry is positioned for full-year results that exceed 2020 earnings, but further profit expansion will be tempered by recent natural catastrophe events, including losses related to Hurricane Ida and deterioration in personal auto results,” Fitch said.
Still, those declines should be viewed in relative terms.
As Fitch noted, statutory earnings for U.S. P/C insurers materially improved in the 2021 first half, with higher commercial lines pricing and the diminishing effects of pandemic-related losses contributing to a better underwriting performance. Significant investment gains also helped.
Translated, P/C industry net earnings for the 2021 first half came in at $38 billion, 56 percent higher than the previous year. Net written premiums also increased 7 percent year-over-year with particularly strong growth in commercial liability, Fitch said. The underwriting combined ratio also improved modestly to 97.1, due to improvements in expenses and policyholder dividend ratios.
Commercial lines carried much of the load, however. Personal auto saw worsening results as driving and claims frequency returned to pre-pandemic levels, and homeowners insurance faced dings from high Q1 winter storm losses.
In the second half of 2021, Fitch notes that most commercial market segments will see a slower rate of rate increases. But there should still be some positive numbers, thanks to near-term earned premium growth that will help produce more commercial lines loss ratio improvement through 2022. As well, overall results will be positive, thanks to favorable prior underwriting period loss reserve development, Fitch said.
Source: Fitch Ratings