US property & casualty insurers recorded $8.2bn underwriting loss for Q1 2023

US property and casualty insurers has recorded an $8.2bn underwriting loss for the Q1 2023, according to AM Best report “Three-Month 2023 US P&C Financial Results“.

Q1 2023 underwriting loss was driven predominantly by personal lines losses.

These were coupled with a 29.7% decline in net investment income, which collectively drove pre-tax operating income down 70.7% to $7.5bn.

US property and casualty P&C industry underwriting results are likely to improve in 2023 as premium rates rise significantly in underperforming automobile and property segments, according to Fitch Ratings.

Claims volatility amid higher inflation and macro uncertainty may impede a return to underwriting profitability.

According to 2023 US P&C Insurance Outlook, declining underwriting performance in personal lines drove a 31% drop in statutory earnings in 2022 for the P&C industry. The personal lines sector should improve in 2023, as recent pricing and underwriting adjustments take hold amid normalizing insured catastrophe losses.

US property & casualty insurers recorded $8.2bn underwriting loss for Q1 2023

Noting the P&C carriers’ net loss comes after $3.4bn in underwriting gains in the same quarter last year. These represented about 98% of the total P&C industry’s net premiums written.

The combined ratio for the P&C industry deteriorated by 6.1 percentage points to 102% in the first quarter of 2023 compared with the same period of 2022.

Catastrophe losses accounted for an estimated 6.9 points on the three-month 2023 combined ratio, three points higher than in the prior-year period.

With tax expense and realized capital gains down 39.5% and 53.2%, respectively, the industry’s net income slid 70.7% to $8.1bn.

2022 was a difficult year for the US P&C insurance industry: claims severities surged with inflation, natural catastrophe losses were elevated for a sixth straight year, and the lowest realized capital gains since 2009 offset higher fixed income yields.

Following a 39% increase from 2018-21, industry policyholders’ surplus (PHS) declined by 7% to $980 billion in 2022, largely from large unrealized investment losses, projected to fall below the 10-year average level of 7%.

Growth in direct written premiums will moderate slightly in 2023, but remain above historical norms as momentum in personal lines premiums accelerate.

Edited by Nataly Kramer    Nataly Kramer