Net income doubled in 2021 for publicly-traded US P&C insurers

Publicly-traded US property and casualty (P&C) insurers saw their net income more than double in 2021 to $133.9bn, according to AM Best. This was despite numerous weather-related natural catastrophes, investment market volatility and the lingering economic effects of the Covid-19 pandemic. In its new Best’s special report, Despite Near-Record Catastrophe Losses, US Property/Casualty Insurers Post Strong Gains, Best says the gains made by insurers more than offset the second-worst year ever in terms of billion-dollar weather and climate disasters. The cost of natural catastrophes for P&C insurers approached $100bn in 2021, leading to a median combined ratio among the publicly-traded P&C insurers of 97.4 on a GAAP basis. Premium revenue rebounded, rising 10%, following an increase of 2.9% in 2020, the lowest increase in several years. Best says the increase in premium in 2021 was attributable to insurers targeting coverage lines that have been generating unfavourable results, such as general liability, professional liability, commercial automobile and catastrophe-exposed property, through approved rate actions and the judicious use of pricing tools for better price adequacy. Overall P&C revenue increased 19.7% in 2021 to $711.1bn, and a double-digit increase in net investment income, as well as a $6.7bn net realised gain on investments, compared with an almost $15bn loss in 2020. Berkshire Hathaway, Allstate and Progressive accounted for half the annual growth in premium revenue in the segment. According to the National Oceanic Atmospheric Administration’s National Centers for Environmental Information, the US experienced 20 separate billion-dollar weather and climate disasters, the largest being Hurricane Ida. That was the second highest in a calendar year, behind the record 22 separate billion-dollar disasters seen in 2020. The cost of all of the 2021 catastrophes for the publicly-traded insurers is nearly $100bn, which added 8.0 points to the industry’s combined ratio, slightly worse than in 2020, when similar losses added 7.7 points to the combined ratio, said Best. The report notes a deterioration in the performance of the publicly-traded P&C insurers’ largest line of coverage, private passenger auto, which experienced a marked increase in claim severity and fatalities. The report states that a 4.0 percentage-point increase in the loss ratio is one area of concern, as traffic patterns returned to pre-pandemic levels, worsening loss severity on higher medical costs and expensive repairs. The report explains that the publicly-traded P&C companies were able to take advantage of the rebounds in the economy, employment and equity markets in 2021, and implemented rate increases across a number of lines. “However, the environment for many of the lines remained competitive, particularly for many of the key commercial lines of coverage such as commercial auto, general and professional liability, medical professional liability and catastrophe-exposed property,” it states. The Best report adds: “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 profitability, absent any deterioration in loss trends.”

Net income doubled in 2021 for publicly-traded US P&C insurers

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