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P/C Insurer's Gains Slip 1Q 2014

Net losses and loss adjustment expenses (LLAE) surged upward in the first quarter of 2014 as compared to the same time period in 2013. Private U.S. property/casualty insurers’ net income after taxes, as a group, fell to $13.8 billion in first-quarter 2014 from $14.3 billion in first-quarter 2013, with insurers’ overall profitability as measured by their annualized rate of return on average policyholders’ surplus falling to 8.4 percent from 9.6 percent.

Though insurers’ net gains on underwriting in first-quarter 2014 were down from the levels experienced a year earlier, underwriting results remained unusually strong. Insurers posted net gains on underwriting for only 21 of the 113 quarters since the start of ISO’s quarterly data, and insurers’ 97.3 percent combined ratio for first-quarter 2014 was 7.7 percentage points better than the average since first-quarter 1986,” said Michael R. Murray, ISO’s assistant vice president for financial analysis.

Deterioration in underwriting results prompted the decreases in insurers’ pretax operating income, net income after taxes, and overall rate of return, with net gains on underwriting falling $2.3 billion to $2.2 billion in first-quarter 2014 from $4.5 billion in first-quarter 2013. The combined ratio — a key measure of losses and other underwriting expenses per dollar of premium — deteriorated to 97.3 percent for first-quarter 2014 from 94.9 percent for first-quarter 2013, according to ISO, a Verisk Analytics company (Nasdaq:VRSK), and the Property Casualty Insurers Association of America (PCI).

“Policyholders’ surplus — the funds available to cover new claims — rose $8.7 billion in first-quarter 2014 to a record-high $662.0 billion, leaving no doubt that insurers are strong, well capitalized, and well prepared to pay future claims. Policyholders can rely on insurers to fulfill their obligations and help finance economic recovery even if we’re struck this hurricane season by a storm more devastating than Superstorm Sandy or Hurricane Katrina,” said Robert Gordon, PCI’s senior vice president for policy development and research.

The figures are consolidated estimates for all private property/casualty insurers based on reports accounting for at least 96 percent of all business written by private U.S. property/casualty insurers.

Source: Property Casualty Insurers Association of America (PCI, News Release – July 3, 2014


Paul Durant

Thursday, July 17, 2014 at 12:33pm PDT

Where do I find Policyholder’s Surplus listed on a stock company’s balance sheet?

I’ll be there was some loss reserve strengthening reflected in the reduced gain.

Based on my 35 years associated as a financial officer with the P&C and L&H industry I think the only thing that should be said is: “We think reserves may be adequate and supported by significant balance sheet surplus”.