U.S. results show income slide

Net income for the U.S. property and casualty industry in the first quarter of the year dropped 5.4% compared with the same quarter last year, according to the Insurance Services Office Inc. (ISO) and the National Association of Independent Insurers (NAII). After-tax income fell from $5.9 billion in first quarter 2000 to $5.6 billion in first quarter 2001, and the industry’s surplus dropped 4.7% for the quarter to $303.7 billion, down from $318.7 billion at the end of 2000. The drop comes despite a 10.4% rise in net written premiums to $81.9 billion for the quarter, compared with $74.1 billion for the same period last year. The decline in net income is attributable in part to further underwriting losses, which sat at $6.1 billion for the quarter, while the declining surplus comes largely as a result of poor investment returns, notes John Kollar, vice president of consulting and research for ISO. Net gain on investments fell 3.8% to $12.7 billion in first quarter 2001, versus $13.2 billion for the same period last year.”The acceleration in written premium growth indicates that anecdotal reports of rate increases are finally being confirmed by actual data,” says Kollar, “but it will take time for stronger written premiums to fully translate into stronger earned premiums and improved underwriting profitability.”And while the industry’s combined ratio improved to 106.2%, compared with 107.2% for first quarter 2000, Kollar notes that this is largely the result of fewer cat losses, rather than pricing. “Some may point to the improvement in the combined ratio as a sign that the industry is finally benefitting from firming insurance markets, but we aren’t there yet.”