Property Casualty Insurers Report a 26 Percent Drop in Net Income in First-Half 2020

Rhea-AI Summary

Net income for the U.S. property/casualty insurance industry fell 26% in the first half of 2020, driven by COVID-19 impacts. Net income after taxes decreased to $24.3 billion from $32.8 billion year-over-year. Significant capital losses of $1.4 billion contrasted with $4.3 billion in gains in 2019. Net underwriting gains dipped to $4.6 billion. Premium relief efforts could exceed $10 billion. The combined ratio surpassed 100% in Q2 as underwriting results worsened, with net income falling to $6.4 billion from $14.9 billion in Q2 2019.

Positive

• Net written premiums rose 2.8% in H1 2020, up from 1.0% in H1 2019.
• Verisk launched an online resource page to support insurers adapting to COVID-19.

Negative

• Net income dropped 26% to $24.3 billion in H1 2020.
• Realized capital losses of $1.4 billion in H1 2020, down from gains of $4.3 billion in 2019.
• Net underwriting losses reached $1.6 billion in Q2 2020, compared to gains of $0.1 billion in Q2 2019.
• Combined ratio rose to 100.2% in Q2 2020, indicating declining profitability.

Industry Results Begin to Show Effects of Covid-19, According to Verisk and the APCIA

JERSEY CITY, NJ, Oct. 27, 2020 (GLOBE NEWSWIRE) -- Net income for the private U.S. property/casualty insurance industry dropped 26% in the first half of 2020, as the effects of COVID-19 began to hurt insurer underwriting results and investment gains, according to Verisk (Nasdaq:VRSK), a leading data analytics provider, and the American Property Casualty Insurance Association (APCIA).

Net income after taxes fell to $24.3 billion in first-half 2020 from $32.8 billion in first-half 2019. Contributing to that drop was $1.4 billion in realized capital losses on investment in first-half 2020, a swing from $4.3 billion in realized capital gains a year earlier.

Net underwriting gains declined to $4.6 billion in first-half 2020 from $5.4 billion a year earlier. Net written premiums grew 2.8% in first-half 2020, above the 1.0 percent a year earlier, but significantly below the 6.2% premium growth rate in first-quarter 2020.

Beginning in the middle of March, the COVID-19 crisis led to large-scale disruptions of daily life and economic activities, affecting insurance premiums. For some commercial policies where the premium is determined by sales, payroll, or other activity-sensitive measures of exposure, economic events directly led to lower premiums.

Many auto insurers provided premium relief to their policyholders as a combination of partial returns of premium, prospective rate reductions, and policyholder dividends. The relief provided within the first half of 2020 could exceed $10 billion, according to an analysis by ISO, a Verisk business.

“Slow improvements in the financial performance of the U.S. property casualty insurance industry were abruptly reversed in the first half of 2020 due to the compounded effects of COVID-19, catastrophes, and civil unrest,” said Robert Gordon, senior vice president for policy, research and international at APCIA. “The combined ratio rose above 100 percent in the second quarter, and potential near-record third quarter catastrophe losses are all but certain to push underwriting results further into negative territory. In addition to experiencing increased losses, insurers are facing a significant drop in revenue from the economic downturn, greater outflows from promised auto insurance rebates to consumers, and a continuation of historically depressed investment returns. While the industry remains stable and able to meet its expected obligations, aggregate policyholder surplus declined $22.1 billion in the first half and the unusual combination of losses and future uncertainty is weighing heavily on renewals.”

“The most visible impact of COVID-19 on underwriting results in the first half of 2020 was the reduction of both premiums and losses, as business in many sectors slowed, auto traffic decreased, and insurers provided premium relief to customers in both personal and commercial lines,” said Neil Spector, president of ISO. “Significant uncertainties remain about the future effects of COVID-19 and it will take time before we know the full impact on insurers’ exposures and losses. While our elected officials navigate the challenges of protecting the U.S. population and supporting its economy during the pandemic, many insurers are responding to the challenge by accelerating their digital transformations to help improve efficiencies, make informed underwriting and claims decisions, and meet the changing needs of their customers.”

This year, Verisk launched an online resource page to help insurers learn about new regulations, access in-depth analysis and critical insights, and discover solutions being created to address the effects of COVID-19. Verisk has also forecasted the potential impact of COVID-19 on commercial lines and developed a web page that provides future-facing strategies for personal lines insurers as they adapt to the new normal.

Second-Quarter Results

Insurers’ net income after taxes fell to $6.4 billion in second-quarter 2020 from $14.9 billion in second-quarter 2019, and their combined ratio deteriorated to 100.2% in second-quarter 2019 from 98.9% a year earlier.

Net written premiums fell $0.7 billion, or 0.4%, to $159.7 billion in second-quarter 2020 from $160.3 billion in second-quarter 2019.

Net underwriting results deteriorated to $1.6 billion in losses in the second quarter 2020 from $0.1 billion in net underwriting gains a year earlier.

View the full report from Verisk and APCIA.  

About Verisk 
Verisk (Nasdaq:VRSK) is a leading data analytics provider serving customers in insurance, energy and specialized markets, and financial services. Using advanced technologies to collect and analyze billions of records, Verisk draws on unique data assets and deep domain expertise to provide first-to-market innovations that are integrated into customer workflows. Verisk offers predictive analytics and decision support solutions to customers in rating, underwriting, claims, catastrophe and weather risk, global risk analytics, natural resources intelligence, economic forecasting, and many other fields. Around the world, Verisk helps customers protect people, property, and financial assets.

Headquartered in Jersey City, N.J., Verisk operates in more than 30 countries and is a member of Standard & Poor's S&P 500^® Index and part of the Nasdaq 100 Index. In 2018 and 2019, Forbes named Verisk to its World’s Best Employers list. For more information, please visit www.verisk.com.

About APCIA
Representing nearly 60 percent of the U.S. property casualty insurance industry, the American Property Casualty Insurance Association (APCIA) promotes and protects the viability of a competitive private insurance market for the benefit of consumers and insurers. APCIA represents the broadest cross section of home, auto, and business insurers of any national trade association. APCIA members represent all sizes, structures, and regions, which protect families, communities, and businesses in the U.S. and across the globe. For more information, visit www.apci.org.

Contact:

Joe Madden for Verisk
Joseph.Madden@verisk.com
201-232-4486

Jeffrey Brewer for APCIA
jeffrey.brewer@apci.org
847-553-3763

Loretta Worters for I.I.I.
lorettaw@iii.org
212-346-5575

FAQ

What is the net income for Verisk in the first half of 2020?

Net income for the private U.S. property/casualty insurance industry fell to $24.3 billion in the first half of 2020.

How much did the capital losses amount to for Verisk in 2020?

Verisk reported $1.4 billion in realized capital losses in the first half of 2020.

What were the net underwriting gains for Verisk in the first half of 2020?

Net underwriting gains for Verisk declined to $4.6 billion in the first half of 2020.

What impact did COVID-19 have on the insurance premiums?

The COVID-19 crisis led to disruptions and lower premiums for some commercial policies.

What was the combined ratio for Verisk in Q2 2020?

The combined ratio for Verisk deteriorated to 100.2% in Q2 2020.