U.S. 1-quarter figures show investment boon

First-quarter results of the U.S. property and casualty insurance industry show signs of improvement; largely on the back of increased investment earnings derived from higher interest rates. The industry’s after tax income for the period clocked in at US$9.2 billion compared with US$9.5 billion for the same period a year ago, reports the Insurance Services Office Inc. (ISO). Investment income for the period amounted to US$9.6 billion compared with US$9.7 billion for the same quarter of 1998. A quarter-to-quarter comparison also shows that the industry notched up 1.6% annualized growth in premiums, with total volume for the first-quarter of 1999 amounting to US$71.9 billion.

Although far from a star performance, the industry’s results do offer some optimism, says Robert Hartwig, vice president and chief economist of New York-based Insurance Information Institute (III). Firstly, he observes, the turn in interest rates bodes well for the industry’s investment income potential for this year, although a rise in rates will negatively impact on realized gains. The latter, however, remained extremely strong for the first-quarter of 1999, up 16.8% on the same period in 1998. And, the overall decline in investment income for 1999’s first-quarter is considerably less than originally projected, as well as the 4.6% decline recorded for the whole of 1998.

More significantly, this quarter’s modest growth in premiums is higher than the growth rate for 1998, with most of the gain believed to be a result of rate strengthening. “This encouraging result is being driven by a firming of prices in some commercial lines, particularly workers’ compensation. Strong economic growth, characterized by record new motor vehicle and home sales is also benefiting insurers.”