A new special report from AM Best has found that the US P&C industry recorded a $24.3 billion net underwriting loss in the first nine months of 2022.
The $24.3 billion net underwriting loss is down $17.9 billion from the prior year period, AM Best noted, as a 8.4% growth in net earned premiums and a 22.3% decline in policyholder dividends were offset by a 14.0% increase in incurred losses and loss adjustment expenses, as well as a 6.5% increase in other underwriting expenses.
It was also noted that the personal lines segment, specifically auto lines, was mainly responsible for the decline in underwriting results. In September, AM Best revised its market segment outlook on the US personal auto insurance market, from stable to negative. It cited a significant deterioration in carriers’ results as of the second quarter, which was driven by continuing inflationary pressures and issues with rate adequacy.
AM Best said that personal lines losses and Hurricane Ian’s impact during the nine-month period caused the P&C industry’s combined ratio to deteriorate to 102.8. The credit rating agency estimated that catastrophic losses comprised 7.0 points on the 9M 2022 combined ratio, down from an estimated 8.2 points in 9M 2021.
It was also found that the decline in pre-tax operating income was mitigated to 19.3%, as a $10.8 billion cash and Treasury distribution to Columbia Insurance Company earlier in the year boosted net investment income for the industry by 29.8%. Tax expense slid down 54.2% and realized capital gains dropped 67.5%, leaving the industry’s net income to drop 26.3% to $29.1 billion.
AM Best stated that the industry surplus declined 11.0% from the end of 2021 to 919.6 billion. This came as 37.9 billion of net income, contributed capital, and other surplus gains were reduced by $27.7 billion of stockholder dividends and a combined $113.3 billion change in unrealized losses at National Indemnity Company, Columbia Insurance Company and State Farm Mutual.