Best’s Special Report: U.S. Property/Casualty Industry Records $25.3 Billion Underwriting Loss in 2017

Investment Weekly News

By a News Reporter-Staff News Editor at Investment Weekly News -- The U.S. property/casualty (P/C) industry sustained a $25.3 billion underwriting loss in 2017, following a $6.3 billion loss in the previous year, as catastrophe losses in the United States reached levels unseen since 2005, according to a new A.M. Best special report.

The Best's Special Report, "Year-End 2017 US Property/Casualty Statutory Results Review," states that higher levels of investment income, along with greater favorable development of prior years' loss reserves, helped offset the underwriting loss. The industry's combined ratio deteriorated 3.1 points to 104.0 in 2017, 9.8 points of which represented by the catastrophe losses, more than double seen in the previous year.

In a positive sign for the P/C industry, net premiums written (NPW) grew for the first time in four years, by 4.7% to $556.9 billion. The growth was strongest in the personal and commercial auto, auto physical damage, and other liability lines. Personal auto loss ratios remain elevated relative to historical norms, but there was improvement from 2016. However, commercial auto liability results continue to deteriorate, with adverse development continuing to the 2011-2013 accident years to the detriment of current calendar year results.

Commercial auto has been the worst performing commercial line in recent years, although significant, compounded rate increases and re-underwriting efforts have led to some improvement. To maintain this improvement, carriers are likely to continue to press for commercial auto rate increases in 2018.

Despite the industry's $25.3 billion underwriting loss, investment income of $49.4 billion drove positive pre-tax operating income of $18 billion for the year, down 55.7% from $40.8 billion in 2016. Net income fell just 9.3%, boosted by net realized gains that increased to $19.1 billion from $7.9 billion in 2016, as well as substantially lower taxes, given the diminished level of taxable income. Return metrics declined as well, with a pre-tax rate of return on revenue of 3.3% and an after-tax return on equity of 4.9%.

To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=273768. A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED. View source version on businesswire.com: https://www.businesswire.com/news/home/20180522005247/en/