Catastrophe Losses Top $7B; Property/Casualty Insurers’ Net Income Drops 42.2% in Q1

The U.S. property/casualty insurance industry saw its net income fall to $7.7 billion in the first quarter (Q1) of 2017 from $13.4 billion in Q1 2016, a 42.2 percent decline. Also, its overall profitability as measured by its annualized rate of return on average policyholders’ surplus fell to 4.4 percent from 7.9 percent, according to ISO and the Property Casualty Insurers Association of America (PCI).

The industry experienced $7.3 billion in catastrophe losses, the highest Q1 catastrophe losses since the 1994 Northridge earthquake and $2.3 billion above the direct catastrophe losses for Q1 2016.

Three major wind and thunderstorm events each resulted in more than $1 billion in damages in Q1 2017, the first time the industry has had three events of that magnitude in Q1 in more than 60 years, according to Beth Fitzgerald, senior vice president, Industry Engagement, ISO.

Three major wind and thunderstorm events each resulted in more than $1 billion in damages in first-quarter 2017.

Insurers’ combined ratio deteriorated to 99.6 percent for Q1 2017 from 97.4 percent for Q1 2016.

There was some good news. Net written premium growth accelerated to 4 percent for Q1 2017 from 3.2 percent for Q1 2016. Net investment gains increased by $1.2 billion to $14.4 billion in Q1 2017 from $13.2 billion for Q1 2016. The industry’s surplus reached a new all-time high value of $709.0 billion as of March 31, 2017, increasing $8.1 billion from $700.9 billion as of December 31, 2016.

Fitzgerald said that insurers are well capitalized and short-term volatility in catastrophe losses is not affecting their ability to provide coverage and pay claims. “However, to remain profitable and provide appropriate returns on their capital, insurers need to plan for the long term and continue to engage in disciplined underwriting based on robust data and analytics,” she said.

Robert Gordon, PCI’s senior vice president for Policy Development and Research, said industry data shows personal auto loss ratio improvement in Q1 2017 but personal property lines losses increased, affected by an almost 50 percent increase in catastrophe losses.