Property-casualty insurers remain financially strong, earning a rare underwriting profit in the first quarter of 2013 for only the 17th quarter in 27 years, new industry data shows.
Overall, p-c insurers netted $14.4 billion in income after taxes for the first quarter of 2013, which ended March 31, according to a report released this week by ISO, the Property Casualty Insurers Association of America and the Insurance Information Institute. The amount represents a roughly 40% spike from the $10.2 billion posted during the same period a year earlier.
For underwriting alone in this year’s first quarter, insurance companies earned a $4.6-billion profit, marking the first net gain since the fourth quarter of 2009, according to the report. Since 1986, insurers have only profited on underwriting in 17 of 109 quarters and have cumulatively lost $407.7 billion on underwriting over the past 27 years.
Underwriting profits “need to become more common,” says I.I.I. President Bob Hartwig, who also spoke about first-quarter p-c results this week at an Independent Insurance Agents & Brokers of Louisiana event. “In the current depressed interest rate environment, more of insurers’ earnings have to come from premium—from the underwriting side of the equation than from the investment side.”
Despite insurers’ years-long challenges with low-interest rates, the report says underwriting profits were bolstered by:
- Premium growth: Net written premiums rose 4.1% during this year’s first quarter, which was the “12th consecutive quarter of growth and the longest continuous period of growth in nearly a decade,” according to Hartwig’s analysis of the results.
- Prior-year reserve releases: Prior-year claims reserves were $5.6 million in the first quarter, up from $3.9 billion during the same period in the previous year. Hartwig attributes the favorable development, in part, to lower-than-expected claims costs for Superstorm Sandy, which occurred in the preceding fourth quarter of 2012.
- Lower catastrophe losses: Insured losses totaled $2.6 billion in the first quarter of 2013, dropping $1 million from the $3.6 billion posted during the same period in 2012, according to the report. Still, first quarter 2013 insured catastrophe losses were slightly above the 10-year quarterly average of $2.4 billion.
Second-quarter disasters—including the Moore, Okla., tornado in May and the Colorado wildfires in June—are expected to boost insured catastrophe losses to $8.1 billion for the first half of the year through June 30, Hartwig says.
But he says he anticipates the industry will be profitable for the first half of 2013—though he cautions it’s difficult to predict end-of-year results because disaster losses typically mount during the height of hurricane season in the third quarter, which ends Sept. 30.
In light of economic challenges, insurance companies are looking to expand premiums, especially in the contracting, energy and health sectors, which are poised for growth, Hartwig adds.
“For agents, they should know that, by and large…carriers are strong,” Hartwig says. “Carriers also understand the economy overall is still somewhat rocky and are certainly looking for areas where they can perhaps see stronger growth.”
Victoria Goff is IA senior editor.