P/C insurance underwriting losses expand, Fitch reports

The U.S. property/casualty industry continued to generate significant underwriting losses in the first half of 2023 despite strong premium growth, Fitch Ratings says. Results are anticipated to improve in the second half of 2023 as pricing increases continue to take hold, but uncertainty remains regarding future catastrophe losses, effects of inflation on loss costs, and loss reserve experience. Fitch’s sector outlook on US P/C insurance is Neutral, with results expected to be stable to improving, with a gradually emerging recovery in personal auto, continued stability in commercial lines underwriting and investment income growth.

The industry will be hard pressed to match the 102.8% combined ratio (CR) posted in FY22. Higher natural catastrophe losses and a lack of improvement in personal auto results drove the industry underwriting CR to 104.4% in 6M23, compared with a 100.0% CR at mid-year 2022.

P/C industry net statutory earnings declined to $9.0 billion in 1H23, corresponding with a 1.8% annualized return on surplus. Statutory earnings fell 73% YoY, and 63% excluding a one-time $10.8 billion investment distribution to a Berkshire Hathaway insurance subsidiary.

Industry policyholders’ surplus increased by 5.4% in 1H23, again exceeding $1 trillion, despite the sharp drop in earnings as the equity market recovery contributed to large unrealized investment gains.