P/C Insurers Report Sharp Decline in First-half Net Income: A.M. Best
AM Best reports that U.S. property and casualty (P&C) insurers reported a 21.6 percent decline in net income to $25.0 billion in the first half of this year, as realized capital gains fell $5.5 billion amid the COVID-19 pandemic. Premium credits issued to policyholders in the second quarter of 2020 due to pandemic-related exposure declines because of stay-at-home orders and government-ordered business closures pushed P&C insurer underwriting and dividend expenses higher in the first half, according to the report. First-half underwriting expenses rose by 5.5 percent, as some insurers recorded policyholder credits as an expense rather than a premium reduction.
Premium credits mostly impacted the personal lines insurance segment, but while expenses increased, the segment’s loss ratio for the first half of the year improved by nearly six points, according to the report. Commercial lines insurers also benefited from a decline in auto accident frequency during the pandemic, but this was offset by higher catastrophe losses and the impact of pandemic-related claims on loss reserves. The P&C industry’s first-half combined ratio was relatively flat at 97.6 percent, but catastrophe losses accounted for 6.5 points, up from an estimated 4.5 points in the prior-year period. -more-