Revealed – US P&C sector underwriting loss for first nine months of 2023

AM Best report outlined factors that resulted in latest figures

Revealed – US P&C sector underwriting loss for first nine months of 2023

Insurance News

By Roxanne Libatique

The US P&C sector incurred a net underwriting loss of $32.2 billion in the first nine months of 2023, according to AM Best’s First Look Report.

This was a $7.6 billion worsening compared to the corresponding period in the previous year.

The industry saw a 9.7% growth in net earned premiums and a 2.2% reduction in policyholder dividends.

Meanwhile, it saw an 11.9% surge in incurred losses and loss adjustment expenses (LAE), accompanied by a 7.3% increase in other underwriting expenses.

The personal lines segment, particularly the homeowners line of business, emerged as the primary contributor to an underwriting results downturn.

Factors driving changes in the P/C industry

A decline in underwriting performance was reflected in the industry's combined ratio, which deteriorated to 103.4, AM Best reported.

Catastrophe losses, including record severe convective storm losses, accounted for 9.8 points on the nine-month 2023 combined ratio – a more adverse outcome compared to the same period in 2022, where it stood at 7.3 points.

Excluding $5.5 billion of favorable reserve development during the first nine months of 2023 (down from $6.7 billion), the industry's accident year combined ratio reached 104.3.

Net income changes

Net investment income remained relatively stable, while the underwriting loss played a pivotal role in a 28.4% decline in pre-tax operating income, totaling $19.9 billion.

A a significant change in net realized capital gains at National Indemnity Company resulted in the industry's net income more than doubling to $65.7 billion.

Industry surplus experienced a slight decline to $980 billion, according to AM Best.

In other news, Swiss Re's latest sigma research, released in September, claimed that 2023 will represent a transitional phase for US P&C industry profitability. The report expects a more robust 2024 for the industry due to improvements driven by higher premiums and increased interest rates.

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