30 August 2017 Insurance

US P&C underwriting losses widen in H1 ‘17

The US property/casualty (P&C) industry recorded a net underwriting loss of $5.1 billion for the first six months of 2017, a deterioration from the loss of $2.0 billion in the prior year period, according to ratings agency AM Best.

This compares to an underwriting income of $3.1 billion in the first six months of 2015.

Growth in incurred losses and loss adjustment expenses continued to outpace growth in premiums in the first half of 2017.

During this period, a 3.7 percent boost in net premiums earned was more than offset by a 6.1 percent rise in incurred losses and a 1.8 percent increase in underwriting expenses. The reported combined ratio of 100.9 percent deteriorated 0.9 points from the prior-year period and was the worst of the last five years’ first-six-month periods, according to AM Best.

Loss reserve development remained flat with the prior-year period. Excluding the $7.2 billion of favourable reserve development in the first half of 2017, the accident year combined ratio for the industry was 103.7 percent.

The industry benefitted from a $2.0 billion increase in net investment income earned, which was negated by a $5.1 billion loss in other income reflecting the impacts of a retroactive reinsurance contract entered into in February 2017 by AIG and National indemnity. Through the contract, National indemnity agreed to provide $20 billion of aggregate cover on much of AIG’s commercial book, covering losses unpaid as of January 1, 2016.

AM Best estimates the US P&C industry six month 2017 catastrophe losses at $17.7 billion, up 18.8 percent from the same period of 2016 and accounting for 6.8 points on the combined ratio.

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