U.S. Property and Casualty Insurers See Solid Performance in First Half of 2021
10 November 2021 - 1:00AM
Private property/casualty insurers in the United States posted
strong net income growth in the first half of 2021 as the country
continued to recover from the economic disruption caused by the
COVID-19 pandemic, according to a report from Verisk (Nasdaq:VRSK),
a leading global data analytics provider, and the American Property
Casualty Insurance Association (APCIA).
As the U.S. economy recovers from the pandemic, insurers' net
income rose to $37.5 billion in the first half of the year, up from
$24.3 billion in the first half of 2020. The annualized rate of
return on average policyholders' surplus, a key measure of overall
profitability, jumped to 7.9% in the first half of 2021, up from
5.8% in the first half of 2020. The industry's combined ratio, a
measure of underwriting profitability, also improved to 96.7%.
Reflecting an uptick in overall economic activity, insurers
wrote $24.4 billion more in premiums during the first half of this
year ($348.4 billion) than in the comparable period in 2020 ($324
billion). Earned premiums grew 5.3% to $329.1 billion for the first
half of 2021. Renewal pricing for standard commercial lines –
general liability, commercial auto, and commercial property – rose
6.7% in the first half of 2021, compared to 7% in 2020 and 5.1% in
2019, according to Verisk's ISO MarketWatch® solution.
More economic activity may also have resulted in more insurance
claims, as commuters returned to roads, businesses resumed
operations, and material and labor costs rose. Incurred losses and
loss adjustment expenses (LLAE) rose 6.9% in the first half of 2021
to $229 billion, significantly higher than the 0.8% increase in the
first half of 2020. Catastrophe LLAE contributed $28.9 billion to
total LLAE (up from $24.7 billion in the first half of 2020), while
non-catastrophe LLAE grew 5.6% to $200.1 billion.
"Net written premiums increased 7.5% in the first half of 2021
(10.3% in Q2) as insurers experienced similar increases in losses
and loss adjustment expenses (LLAE) from ongoing record wildfires,
floods and freezes, a spike in ransomware attacks, worsening
inflation, and spiraling litigation costs," said Robert Gordon,
APCIA senior vice president, policy, research and international.
"While insurers benefited from a positive swing in net realized
capital gains, the industry faces ongoing headwinds from climate
change, significant deterioration in auto claims severity, growing
cyber liability exposure, and emerging losses from the impacts of
long-haul COVID. As the pandemic appears to unwind, the industry
has been bolstering its balance sheet to protect consumers against
increasing natural and man-made catastrophic exposures."
The effects of the COVID-19 pandemic prompted rebates to auto
insurance policyholders and $4.4 billion in policyholder dividends
in 2020. Though still slightly above the historical average, the
$1.6 billion in dividends issued through the first half of 2021 was
closer to pre-pandemic dividend levels.
Insurers' income also benefited from $9.2 billion of realized
capital gains, a $10.6 billion swing from the losses realized in
first-half 2020.
"We clearly see the imprint of the pandemic on the industry's
performance through the first half of 2021," observed Neil Spector,
president of ISO at Verisk. "Economic activity that was suppressed
for much of the first half of 2020 has sprung back, bringing its
own set of challenges. Rising material costs and acute labor and
supply chain shortages in many sectors create a powerful need for
accurate, continuously updated sources of underwriting data to help
insurers manage a dynamic risk environment."
Growth in second quarter fuels first-half performance
Insurers posted $17.5 billion in net income for the second
quarter of 2021, a strong improvement from the $6.4 billion in the
year-ago quarter. The income increase was also reflected in
annualized rate of return on average surplus, which climbed to 7.3%
from 3.2% a year earlier. While improved, the rate of return didn't
quite reach the 7.6% achieved in the second quarter of 2019 or the
9% hit in the second quarter of 2018. The industry's combined ratio
also improved during the quarter to 97.2% from 100.2% in the second
quarter of 2020.
View the full report from Verisk and APCIA.
About Verisk
Verisk (Nasdaq:VRSK) provides predictive analytics and
decision-support solutions to customers in the insurance, energy
and specialized markets, and financial services industries. More
than 70 percent of the FORTUNE 100 relies on the company's advanced
technologies to manage risks, make better decisions and improve
operating efficiency. The company's analytic solutions address
insurance underwriting and claims, fraud, regulatory compliance,
natural resources, catastrophes, economic forecasting, geopolitical
risks, as well as environmental, social, and governance (ESG)
matters. Celebrating its 50th anniversary, the company continues to
make the world better, safer and stronger, and fosters an inclusive
and diverse culture where all team members feel they belong. With
more than 100 offices in nearly 35 countries, Verisk consistently
earns certification by Great Place to Work. For more: Verisk.com,
LinkedIn, Twitter, Facebook, and YouTube.
About APCIA Representing nearly 60 percent of
the U.S. property casualty insurance industry, the American
Property Casualty Insurance Association (APCIA) promotes and
protects the viability of a competitive private insurance market
for the benefit of consumers and insurers. APCIA represents the
broadest cross section of home, auto, and business insurers of any
national trade association. APCIA members represent all sizes,
structures, and regions, which protect families, communities, and
businesses in the U.S. and across the globe. For more information,
visit www.apci.org.
Media Contact:
Ali Krueger Herbert for Verisk
201.469.3998
ali.krueger@verisk.com
Jeffrey Brewer for APCIA
847-553-3763
jeffrey.brewer@apci.org
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