US P/C results fail to match the record results of 2006, reveals AM Best

A strong fourth quarter capped another solid year for the US property/casualty industry, but year-end 2007 results fell short of the record profits recorded in 2006.

The industry’s net income fell almost 7.0% to $66.5bn from $71.3bn in 2006. The industry’s after-tax return on equity slipped to 13.0% in 2007 from 15.3% recorded in 2006.

The US P/C industry recorded its second consecutive underwriting profit in 2007, posting a $22.1bn gain, compared with $32bn in 2006.

Driven by across-the-board softening in personal and commercial lines pricing, leakage of premium and a growing interest in alternative forms of risk transfer, net premiums written fell nearly 1.0% to $446bn in 2007.

The industry’s combined ratio deteriorated modestly to a still profitable 94.9% in 2007, up from 92.2% in 2006.

Strong operating results pushed policyholder surplus up by 7.1% to $527.5bn in 2007 from $492.8bn at year-end 2006.

Total catastrophe losses were an estimated $6.7bn in 2007—among the lowest years on record, down from $9.2bn in 2006.

The personal lines segment’s underwriting results remained strong on favorable but flattening private passenger auto loss-frequency trends, moderate but increasing loss-severity trends and a lack of significant catastrophes.

The commercial lines segment reported its second consecutive underwriting profit in 2007, reflecting continued underwriting discipline, favorable loss-reserve development and mild catastrophe losses.

The US reinsurance segment reported a combined ratio of 94.4% in 2007, slightly better than the 94.9% reported for 2006.

The US P/C industry is projected to record a modest underwriting gain in 2008, as insurers are expected to maintain the delicate balance between growth opportunities and profitability.