Polar vortex cools Q1 profits
Increased catastrophe and weather claims damaged profits in the US property/casualty during the first quarter of 2014.
According to AM Best, although underwriting declined during the quarter, it was the third consecutive profitable first quarter posted by the industry, producing a combined ratio of 96.4, up from 92.7 in the first quarter of 2013.
“Although the pace of rate increases has slowed over the past year, companies continue to report rising premiums in most lines of business. Coupled with economic conditions that are, at a minimum, remaining steady where not improving modestly, direct premium written (DPW) continues to increase in most lines of business,” said the report.
Cat losses rose considerably in the quarter with the industry posting $1.8 billion cat losses in the quarter, more than twice the $772 million in the first quarter of the prior year. The polar vortex, which brought record cold temperatures across much of the northern US, accounts for much of this increase.
Core underwriting results also slipped in the first quarter of 2014. The industry’s core loss ratio measured 66.8 in 2014, an increase from 65.5 in 2013.
AM Best said: “While this is partially attributable to weather-related losses that were below the catastrophe threshold, several companies reported increases in large losses unrelated to weather. It is expected that, as the year progresses, these claims will return to more normal levels. However, core underwriting results will be monitored closely as more competitive conditions return in some market segments, particularly for companies that have grown aggressively in recent years.”
Net premiums written (NPW) grew more slowly in the first quarter of 2014 than in the prior year, up just 2.7 percent, compared with an increase of 4.6 percent in 2013. AM Best said that while companies continue to report increasing rates and exposures, the pace of that growth has dropped significantly.