The Big Picture

The P&C industry reported slightly better underwriting results in the first six months of 2017 versus year-end 2016, as substantial reserve releases offset a sharp deterioration in the 2017 accident year result (impacted by sizeable weather-related losses in the period). Annualized operating earnings and returns in the first six months of 2017 were flat relative to year-end 2016. Surplus showed decent growth, while direct and net premiums both grew over 3%. Total investment return increased notably, in part due to solid net capital gains, while the net investment yield continued to decline.

Positive Developments

  • Surplus growth was decent.
  • The total investment return improved notably in the first six months of 2017 on solid net capital gains.
  • Commercial lines rates were flat.
  • Annualized direct premium growth increased sharply.

Negative Developments

  • Underwriting loss grew in the first six months of 2017.
  • The P&C industry showed a substantial reserve release, with more than half of it coming from two composite subsidiaries of personal lines giant State Farm Insurance Group.
  • The net investment yield continues to fall.

After fairly flat results in 2014 and 2015, the composite Accident Year combined ratio deteriorated in both 2016 and the first six months of 2017 impacted by higher storm losses.

The ALIRT P&C Composite Index tracks industry financial performance for commercial and personal lines writers.  Both Commercial and Personal lines writers’ performance improved in the first six months of 2017, after both saw performance decline through 2015 and into early 2016.

Direct premium growth slowed notably in 2015 and 2016 (reflecting in part due to a soft-ish rate environment), before jumping sharply in the first six months of 2017.

Overall Commercial lines rates continued to decline in the first six months of 2017, but the rate of decline slowed considerably, which may reflect an attempt at greater underwriting discipline in the industry.

ALIRT’s scoring range is zero to 100, with a higher score representing stronger relative financial strength/performance.

The dark blue bars in the chart represents the average “solvent company” score range (39 – 61) within ALIRT’s Model.

Represented by the ALIRT P&C Composite, which consists of the 50 largest U.S. property/casualty insurers (excludes professional reinsurers).

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