Best’s Special Report: Lower U.S. Property/Casualty Insurer Expenses Boost Segment’s Underwriting Results

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)--
Despite competitive market conditions, macroeconomic trends and severe weather trends that have fueled volatility in the U.S. property/casualty (P/C) industry’s underwriting results for a decade, insurers still managed to improve their underwriting and operating results, according to a new AM Best report.

These results were particularly evident in the segment’s underwriting expense ratio, which improved noticeably during the 2014-2024 timeframe. In 2024, the U.S. P/C segment’s combined ratio dropped 5.1 percentage points to 96.6 from a year earlier, which benefitted from 5.4 percentage point drop in the loss and loss adjusted expense ratio.

The turbulence caused by macroeconomic and weather-related factors largely impacted the P/C industry’s loss and loss adjustment expense ratio as insurers fought to improve premium adequacy during times when claim costs for several lines of business increased notably, which included the homeowners, private passenger auto, commercial auto, and general liability lines of business.

“Insurers fought through this turbulence, and in 2024 their financial fortunes improved noticeably in terms of both underwriting and operating results,” said David Blades, associate director, AM Best. “The improvements were especially evident for those personal lines insurers that had experienced decidedly unfavorable results from 2021 to 2023.”

Among the report’s other findings:

Comparing 2014 to 2024, the overall 2.4 percentage point decrease in the U.S. P/C segment’s overall underwriting expenses ratio was primarily driven by a 1.9-point decrease in the other acquisition expenses ratio and a smaller, 0.5-point decrease in the general expense ratio.
Most expense dollars for P/C insurers—other than salaries and related payroll taxes—is spent on agents’ commissions and brokerage fees. Commission and brokerage (C&B) fees as a proportion of net premium written have been relatively consistent for the past 10 years; however, the difference in the C&B ratio for different lines of business is noticeable.
As private passenger auto insurance results deteriorated over the past several years, some insurers that heavily used advertising to build or defend their market share pulled back in 2022 and 2023. This was prior to substantial improvement in personal auto and homeowners results in 2024, which led to a 60% year-over-year increase in advertising expenses.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=361408.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.