Private U.S. property/casualty insurers’ net losses on underwriting grew to $34.9 billion in nine-months 2011 from just $6.3 billion in the first nine-months of 2010. In a time of a greater risk for the P&C industry this is not welcome news.
The combined ratio deteriorated to 109.9 percent for nine-months 2011 from 101.2 percent for nine-months 2010, according to ISO and the Property Casualty Insurers Association of America (PCI).
Net income after taxes fell to $8 billion for the nine-months period, down from $27.1 billion in nine-months 2010, with insurers’ overall profitability as measured by their annualized rate of return on average policyholders’ surplus dropping to 1.9 percent from 6.8 percent, in an article by the Insurance Journal.
In a report released Thursday, Oldwick, N.J.-based Best said the domestic property/casualty underwriting industry incurred $30 billion in catastrophe-related losses through the first three quarters of the year, 15 times the catastrophe losses recorded in the same period last year. The industry recorded $12.8 billion in net income through September, less than half of the $33 billion in nine-month profits during the same period last year.
These losses were partially offset by net investment gains which grew $2.1 billion to $42 billion in nine-months 2011 from $39.8 billion in nine-months 2010.
2011's devastation was due to many, many natural disasters that befell the North American mainland. These included devastating Texas wildfires which consumed tens of thousands of acres and and destroed over 1200 homes with total losses exceeding $150 million, according to the Insurance Council of Texas. The fires, fuled by drought, high winds, and scorching heat impacted all but two of Texas' 274 counties.
The devastation inlcudeed a massive tornado which destroyed nearly 30% of Joplin, Missouri causing more than 120 deaths.
In the spring of 2011 a string of massive tornados tore through Mississippi, Alabama, and Georgia causing billions in damage and killing more than 280 persons in six states.
This all occurred prior to hurricane season which was the most devastating since 2008 with Hurricane Irene causing more than $10 billion damage from North Carolina to Vermont where floods were particularly devastating.In the week prior to hurricane Irene in late August there was also a damaging earthquake that rocked the east coast from Virginia to New Jersey.
It was fortunate, however, that hurricane Irene skirted New York City as the huge metro area was directly in its path at one point so 2011 P&C damages could have been much, much worse.
According to Occupational and Health Magazine, the vast majority of the losses in 2011 resulted from tornadoes and hailstorms in April and May. Hurricane Irene losses were considerable, but most of the damage was caused by flooding, which was either not covered by homeowners' policies or was insured by the National Flood Insurance Program; NFIP losses are not included in the 2011 insured loss estimate.
"Despite massive net losses on underwriting, insurers emerged from nine-months 2011 strong, well-capitalized, and capable of paying future claims," said Robert Gordon, PCI’s senior vice president for policy development and research.
Gordon said that as of Sept. 30, 2011, insurers had $538.6 billion in policyholders’ surplus to cover new claims and meet other contingencies — which he said is "125 times all the direct insured losses to U.S. property from Hurricane Irene."
The property/casualty industry’s 1.9 percent annualized rate of return for nine-months 2011 was the net result of negative rates of return for mortgage and financial guaranty insurers and single-digit rates of return for other insurers, according to PCI and the ISO.
Underwriting Results
Net losses on underwriting grew $28.6 billion to $34.9 billion in nine-months 2011 from $6.3 billion in nine-months 2010, as growth in LLAE and other underwriting expenses outpaced growth in premiums earned, PCI noted.
Net written premiums rose $10.1 billion, or 3.1 percent, to $334.5 billion for nine-months 2011 from $324.5 billion for nine-months 2010. Net earned premiums rose $8.1 billion, or 2.6 percent, to $323.8 billion from $315.7 billion.
