The most recent tallies of financial results by rating agency analysts reveal that the property/casualty insurance industry weathered the storms of catastrophe losses and COVID, with one segment actually reporting better combined ratios and higher income than in 2019.
A Mar. 16 report from Moody’s Investors Service, “Rising commercial pricing and economic recovery support earnings in 2021,” reveals that catastrophe losses had a bigger impact than COVID on industry financial results. Analyzing the results for 22 rated U.S. P/C insurers, Moody’s estimates that the group posted $5 billion in coronavirus-related claims and $12.8 billion in weather-related catastrophe losses.
The $12.8 billion weather catastrophes compare to $9.5 billion in 2019 for the 22-company cohort. Already in 2021, AIR Worldwide has put a $10 billion estimate on one catastrophe for the entire industry—Winter Storm Uri in February 2021, the Moody’s report notes.
Insurers reporting the largest weather-related catastrophe totals were Allstate ($2.8 billion), Liberty Mutual ($2.5 billion) and Chubb ($1.4 billion). Still, Allstate and several other personal lines insurers, saw net income soar by double-digit percentages in 2020. Progressive topped the gainers with a 43 percent jump in net income, compared to 18 percent for Allstate.
Low levels of vehicle use during the pandemic benefited personal lines insurers, according to the Moody’s analysts, who calculated a weighted average personal auto insurance combined ratio of 87.9 for eight writers of the coverage. That was 5.5 points lower than a 93.4 personal auto insurance combined ratio for the same group for 2019.
Across the entire 22-member sampling of U.S. insurers, less than one-quarter of which are personal lines writers, net income fell 8.9 percent to $28.1 billion in 2021. But shareholders equity grew 8 percent for the group, and the overall combined ratio for the 22 insurers stayed nearly flat at 95.0 in 2020 vs. 95.1 for 2019.
On the commercial lines side, “We expect pricing increases to exceed loss cost trends, leading to higher underlying underwriting margins,” the Moody’s report says, pointing to factors of rising litigation and reinsurance costs, low interest rates, and coronavirus-related claims, which are likely to support further commercial rate increases over the next 12 months.
Another positive indicator in the Moody’s report comes from an macroeconomic forecast, projecting that the U.S. economy will grow by 4.7 percent in 2021 and 5.0 percent in 2020, reversing the 3.5 percent contraction in 2020—with the economic activity expected to reach the pre-COVID level in the second half of this year.
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Like Moody’s, analysts at Fitch Ratings see improved underwriting…
Read More: 2020’s P/C Insurance Industry Results and What They Mean for 2021