P-C Performance Metrics on the Rise

Reversing steep declines in net income and overall profitability in 2014, private U.S. property-casualty insurers grew net income after taxes 14.1% to $44.0 billion in the first nine months of 2015, according to ISO, a Verisk Analytics business, and the Property Casualty Insurers Association of America (PCI).

The data reports that overall profitability (measured by rate of return on average policyholder surplus) surged 1.2 points to 8.8%. Performance improved during the nine-month period across several key industry metrics, including:

• Combined ratio: improved to 96.9%, from 97.7% in 2014
• Net investment premiums: increased $300 million to $34.8 billion
• Realized capital gains: up slightly to $8.9 billion from $8.8 billion
• Net investment gains: grew $600 million to $43.7 billion
• Net written premium growth: increased to 4.1% from 4.0% in 2014

The numbers bolster industry confidence following less-than-promising performance in 2014. “Surplus and premium to surplus continue to hover near historic levels, underscoring insurers’ rock-solid financial foundation and ability to serve consumers,” says Robert Gordon, senior vice president for policy development and research for the PCI.

Results also reveal a continually expanding pool of premiums. According to Robert Hartwig, former Insurance Information Institute president and chief economist, this marks the fourth consecutive year of premium growth in the 4–4.5% range—indicating that “the p-c insurance premium pie is growing by roughly $20 billion per year.”

At the same time, certain lines are experiencing more pronounced attention. “Growth is somewhat stronger on the personal lines side,” Hartwig points out. “Agents with a proportionately large auto and home book will likely see stronger growth than those focused primarily on commercial lines.”

By contrast, commercial premium growth for commercial lines is lagging. “These conditions could contribute to smaller commissions and more competition,” Gordon says. “On the other hand, it creates opportunities to expand into new or different markets such as cyber, flood and the sharing economy. It also provides an opportunity to demonstrate added value services and how agents can meet emerging clients’ needs.”

Jerry Soverinsky is an IA contributor.