Best’s Special Report: U.S. Property/Casualty Industry Sustains Favorable Rating Activity in First-Half 2017

By a News Reporter-Staff News Editor at Journal of Transportation -- Credit rating activity for the U.S. property/casualty (P/C) industry in the first half of 2017 was favorable, with upgrades outpacing downgrades. Nearly one-third of the 2017 upgrades were driven by increased parental support, on-going mergers and acquisitions (M&A) and the generally enhanced importance of companies within specific organizations. Other positive rating actions were due to tightened underwriting standards that have led to sustained favorable results in recent years, increases in risk-adjusted capital and improvements in enterprise risk management, according to a new A.M. Best special report.

The Best's Special Report, "Favorable Ratings Activity Continues for U.S. Property/Casualty Industry," states that Long-Term Issuer Credit Rating (Long-Term ICR) upgrades significantly outpaced Long-Term ICR downgrades in the first half of 2017 (25 versus 8), with most of the changes occurring in the personal lines segment. This continues a prior-year trend of upgrades outnumbering downgrades, although in 2016, the split was closer (27 versus 21).

Macroeconomic factors have generally been positive over the past year, with lower levels of unemployment, coupled with higher housing starts and new car sales. However, after three years of posting underwriting profits, the P/C industry recorded an underwriting loss of nearly $6.6 billion in 2016, driven by an increase in frequency and severity, particularly in the automobile business. Affirmations remained the most common rating action at 86%, reflecting the overall stability of the U.S. P/C industry.

Although nearly 80% of the commercial and personal lines segments' ratings have a stable outlook, the percentage of negative outlooks continues to outpace the percentage of positive outlooks in each segment. In the commercial lines segment, 10% of its rating units had a negative outlook versus 7% on the positive side, and in the personal lines segment, the split was 13% to 8%. The report also summarizes rating activity among the top 10 largest rating unit/companies in the two major segments.

A.M. Best maintains a negative outlook on the commercial lines segment, owing to a competitive pricing environment; rising losses, particularly in the commercial automobile sector; and the prolonged low interest rate environment, which will strain operating profitability. The personal lines segment has a stable outlook from A.M. Best; however, there are challenges as demonstrated through the first three months of 2017, the P/C industry posted an underwriting loss of more than $840 million, the first, first-quarter underwriting loss since 2012. The deterioration in profitability was driven by the ongoing pressure on the automobile business, as well as above average catastrophe losses.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=264693. A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2017 by A.M. Best Rating Services, Inc. and/or its subsidiaries. ALL RIGHTS RESERVED. View source version on businesswire.com: http://www.businesswire.com/news/home/20170817005556/en/

Keywords for this news article include: A.M. Best, Investing, Automobiles, Transportation.

Our reports deliver fact-based news of research and discoveries from around the world. Copyright 2017, NewsRx LLC