Insurance & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Policy Administration

09:45 AM
Connect Directly

P&C Insurers’ Net Income Reaches $16.5 Billion in First-Half 2010, ISO, PCI and III Report

P&C insurers’ net income reaches $16.5 billion after taxes in first-half 2010, ISO, PCI and III report.

Private U.S. property/casualty insurers’ net income after taxes rose to $16.5 billion in first-half 2010 from $6 billion in first-half 2009, with insurers’ overall profitability as measured by their annualized rate of return on average policyholders’ surplus increasing to 6.3 percent from 2.6 percent, according to a report from Jersey City, N.J.-based ISO, the Property Casualty Insurers Association of America (PCI, Des Plaines, Ill.) and the Insurance Information Institute (III, New York).

Reflecting insurers’ $16.5 billion in net income and other developments in first-half 2010, policyholders’ surplus — insurers’ net worth measured according to Statutory Accounting Principles — rose $19.1 billion, or 3.7 percent, to $530.5 billion at June 30, 2010, from $511.4 billion at year-end 2009. Insurers’ net investment gains — the sum of net investment income and realized capital gains (or losses) on investments — grew $13.3 billion to $25.8 billion in first-half 2010 from $12.5 billion in first-half 2009, powering the increases in the insurance industry’s net income, overall rate of return, and policyholders’ surplus.

Partially offsetting the improvement in investment results, insurers’ net losses on underwriting grew to $5.1 billion for six-months 2010 from $2.1 billion for six-months 2009. The combined ratio — a key measure of losses and other underwriting expenses per dollar of premium — deteriorated to 101.7 percent for six-months 2010 from 100.8 percent for six-months 2009, according to ISO and PCI.

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.

“Property/casualty insurers’ positive results for first-half 2010 are yet another testament to the conservative investment strategies and superior risk management that enabled insurers to emerge from the financial crisis and great recession essentially unscathed,” said David Sampson, PCI’s president and CEO, in a press release. “Combining insurers’ $530.5 billion in policyholders’ surplus as of June 30 with their $556.1 billion in loss and loss adjustment expense reserves and their $202.3 billion in unearned premium reserves, insurers had nearly $1.3 trillion on hand to pay claims and meet other contingencies — up from $1.2 trillion at June 30, 2009. This means we can all be confident that insurers have the financial resources to fulfill their obligations to policyholders when catastrophes strike.”

“Insurers’ positive results for first-half 2010 make it easy to overlook the ongoing challenges facing insurers. With the recovery from the great recession remaining agonizingly slow and competition in commercial insurance markets continuing to escalate, top-line premiums remained flat and insurers’ rate of return remained far below benchmarks like the 13.9 percent long-term average rate of return for the Fortune 500,” said Michael R. Murray, ISO’s assistant vice president for financial analysis, in the press release. “Moreover, insurers’ 6.3 percent annualized rate of return for first-half 2010 was also 3.1 percentage points less than the 9.4 percent average annualized first-half rate of return for the insurance industry based on quarterly data extending back to 1986. And because of today’s low investment returns and the same long-term decline in investment leverage that helped insulate insurers from the financial crisis, insurers must now achieve better underwriting results just to be as profitable as they once were. For example, in first-half 1986, insurers achieved a 14.1 percent annualized rate of return with a combined ratio of 108.9 percent. Insurers’ annualized rate of return for first-half 2010 was 7.8 percentage points lower even though the combined ratio was 7.2 percentage points better.”

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

Register for Insurance & Technology Newsletters