The mid-year 2024 financial results for 41 North American property and casualty insurers indicate strong operating returns across sectors. Improved underwriting results and higher investment income fueled this performance, according to Fitch Ratings report.
Nearly every segment achieved double-digit operating returns on common equity, with personal lines—especially auto, Florida homeowners, commercial specialty, and reinsurance—showing particularly strong outcomes.
The U.S. property and casualty insurance sector experienced subdued statutory financial performance, primarily due to a decline in personal lines.
Group underwriting margins improved in the first half of 2024, with a combined ratio of 91.0%, down from 96.9% in the first half of 2023. This improvement largely reflects a significant recovery in personal lines performance.
US P&C insurance industry starts with solid momentum
The US P&C insurance industry starts 2024 with solid momentum. Though profitability lagged behind the cost of capital last year, strong premium increases, reduced claims cost inflation, and higher investment returns began improving industry results by the second half of 2023, according to Swiss Re report.
These positive trends are expected to continue into 2024-2025, driving further profitability gains. The loss ratio for personal lines exceeded that of commercial lines by 21 percentage points during the first nine months of 2023, but this gap is expected to narrow in 2024.
Faster growth in personal lines premiums and a reduction in economic inflation, which primarily benefits personal lines, contribute to this change, while social inflation continues to affect commercial lines.
North American P&C insurers earnings
Strong earnings supported capital growth, with group shareholders’ equity increasing by 6% in the first half of 2024. This growth reflects positive net earnings and the relative stability of unrealized losses on fixed maturities, according to U.S. P&C Insurance: Weak Performance report.
Equity growth was moderated by a 33% increase in capital returned to investors, highlighted by American International Group, Inc.’s heightened share repurchase activity during this period.
U.S. property and casualty market is on track for a return to underwriting profitability
The U.S. property and casualty market is on track for a return to underwriting profitability and significant capital return improvements for the full year, according to Fitch. However, results may fall short of first-quarter levels due to uncertainties around natural catastrophe exposures and loss reserve trends.
U.S. P&C insurers achieved a strong statutory underwriting profit year-over-year, driven by reduced winter storm losses and a recovery in personal auto performance.
The market faces ongoing challenges, particularly in maintaining commercial lines pricing amid ongoing loss-cost inflation and increased litigation risk in certain segments.
P&C Insurer Underwriting Performance
| Performance | 2024 |
| Loss Ratio | 66.1% |
| Expense Ratio | 24.9% |
| Combined Ratio | 91.0% |
| AY Combined Ratio | 92.4% |
| AY Combined Ratio, Excluding Catastrophes | 87.3% |
| Annualized Operating ROCE | 11.1% |
| Annualized Net ROCE | 7.3% |
Prior-year reserve experience remained favorable in the first half of 2024, with reserve releases benefiting the combined ratio by 1.4 points, consistent with the first half of 2023.
However, several insurers reported casualty reserve charges for accident years 2020-2023, driven by underpricing and inflationary pressures, following similar charges for more mature accident years in 2023.
Recovery in personal auto underwriting results
Most U.S. personal auto insurers reported a double-digit reduction in their combined ratio, the result of sustained efforts to restore target profitability after severe losses in 2022 and 2023.
Swiss Re project the industry’s return on equity (ROE) to reach 9.5% in 2024 and 10% in 2025, supported by premium growth of 7.0% and 4.5% in those years.
The recovery in personal auto underwriting results significantly contributed to the improved returns in the first half of 2024. Although historically stable, the personal auto line has experienced considerable volatility over the past five years.
Price gains in personal auto insurance have started to decelerate as more carriers reach rate adequacy and competition for new business picks up. The motor vehicle insurance CPI measure quoted in headlines was up 20.3% y-o-y in May after peaking at 22.6% in April.
The improving mid-year 2024 results for auto insurers are expected to persist through the rest of 2024 and into 2025. Significant price hikes and easing claims severity have strengthened the segment’s profitability.
The return to underwriting profitability may cause price increases to level off. As underwriting improves, competition and pressure from policyholders and regulators could limit further price hikes.
Personal auto insurance underwriting profitability appears to finally be headed in a positive direction after recent years of record underwriting losses. But while these gains show improvement, it will likely take time for them to be reflected in flattening premium rate.
In 2024, Swiss Re expect commercial property growth rates in the high single digits, and liability rate growth in the low single digits, on average. Commercial lines average rates increased by 8.1% year-on-year in 3Q23, slower than the 8.9% gain in 2Q23, according to the CIAB. Within this, property rate gains are strong but decelerating, rising 18% after a 20% increase in 2023.
Persistently high inflation and slowing economic growth raises potential for an unfavorable shift in loss reserve adequacy that clouds the earnings picture, led by commercial auto insurance and other liability product lines.
The accuracy of insurers’ loss projections for claims severity tied to inflation and litigation risks in commercial auto and other liability business will determine if the P&C insurance industry will reach its 19 consecutive year streak of favorable calendar-year loss reserve development in 2024.
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AUTHORS: Laura Kaster, CFA – Senior Director of North and South American Financial Institutions, Fitch Ratings, Christopher Grimes – Director at Fitch Ratings, Elizabeth Kolling – Analyst, Insurance at Fitch Ratings
