US P&C insurers defy nat cat; double profit in 2021 on premium rebound
US market-listed P&C insurers defied the nat cat deluge to more than double profits on a 10% growth in premium revenue driven by gains for Berkshire Hathaway, Allstate and Progressive.
“Insurers rebounded in 2021, posting gains in all key revenue and income measures and overcoming catastrophe losses,” AM Best said in a report on composite earnings of market-listed American P&C insurers.
Net income more than doubled to $133.9 billion, a nearly $70 billion increase over the prior year.
Nearly half of the increase came on the top line. Premium income rose 10% or $32 billion.
Half of that increase could be accounted for by growth at Berkshire Hathaway, Allstate and Progressive on the return to normalcy for personal auto insurance, which had offered lockdown refunds to drivers in 2020.
Rates have been the next key driver. “The push for more adequate rates for certain lines of coverage and certain classes of business has definitely elevated top-line premiums, but insurers still face the challenge of determining how much their exposure growth is affecting the rise in premium levels and support underwriting profit margins,” AM Best analysts wrote.
Rates should still be pressed to pad against claims costs. “Many insurers still need to improve their pricing to more adequately reflect claim costs which would not only increase premium revenue, but also help improve underwriting iprofitab9ility,” analysts wrote.
Premium growth came part and parcel with a larger 19.7% increase in overall revenues to $711 billion that included a notable 22% rise in fee income as well as less dependable increases in potentially volatile lines like investment income or non-operating income.
“These gains more than offset the second-worst year ever in terms of billion dollar weather and climate disasters,” analysts wrote.
Private passenger auto also caused claims difficulties. Reduced traffic levels allowed for higher severity among speeders, only to add on increased frequency once drivers hit the road again post-pandemic.
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