P/C Net Income, Surplus Drop in First Quarter

The U.S. property/casualty industry’s net income after taxes dropped 5.4 percent
to $5.6 billion in first-quarter 2001 from $5.9 billion in first-quarter 2000, according to Insurance Services Office, Inc. (ISO) and the National Association of Independent Insurers (NAII).

ISO and the NAII also report that the industry’s consolidated surplus – its assets minus its liabilities – fell 4.7 percent to $303.7 billion at March 31 from $318.7 billion at Dec. 31, 2000.

Contributing to the decline in net income was a 2.4-percent increase in the industry’s net loss on underwriting to $6.1 billion in first-quarter 2001 from $6 billion in first-quarter 2000. In addition, the industry’s net gain on investments declined 3.8 percent to $12.7 billion in first-quarter 2001 from $13.2 billion in first-quarter 2000.

Industry net written premiums for first-quarter 2001 were $81.9 billion, compared with $74.1 billion in the same period a year ago.

The underwriting loss in first-quarter 2001 amounts to 8 percent of the $76.7 billion in premiums earned during the quarter, down from 8.4 percent of the $71 billion in premiums earned during first-quarter 2000.

The figures are consolidated estimates for the entire industry based on the reports of insurers that account for 96 percent of the country’s property/casualty insurance business.

Net losses on underwriting grew in first-quarter 2001 primarily because of an increase in loss and loss-adjustment expenses. The industry incurred $60.8 billion in loss and loss-adjustment expenses in first-quarter 2001, up $4.8 billion, or 8.5 percent, from $56.1 billion in first-quarter 2000. The 8.5-percent increase in first-quarter 2001 compares with an 11.6-percent increase in fourth-quarter 2000 and an 8.8-percent increase in first-quarter 2000.

Overall loss and loss-adjustment expenses increased in first-quarter 2001 even though catastrophe losses dipped. According to ISO’s Property Claim Services unit, first-quarter 2001 catastrophe losses totaled $705 million, down from $2 billion in first-quarter 2000. Other loss and loss-adjustment expenses totaled $60.1 billion in first-quarter 2001, up 11.1 percent from $54.1 billion in first-quarter 2000.

The combined ratio – a measure of losses and other underwriting expenses per dollar of premium – improved to 106.2 percent in first-quarter 2001, 1 percentage point better than the 107.2 percent combined ratio for the corresponding quarter of 2000.