Pandemic Drags Down Property-Casualty Insurers' First-Half Net Income

The US property-casualty insurance industry's net income dropped 26 percent in the first half of 2020, as the effects of the COVID-19 pandemic began to hurt underwriting results and investment gains, according to data analytics firm Verisk and the American Property Casualty Insurance Association (APCIA).

The industry's net income after taxes fell to $24.3 billion in the first half of the year from $32.8 billion during the same period in 2019. Contributing to the drop were $1.4 billion in realized capital losses on investment income during 2020's first 6 months, down from $4.3 billion in realized capital gains a year earlier.

Property-casualty insurers' net underwriting gains declined to $4.6 billion in the first half of 2020 from $5.4 billion during the same period in 2019. Net premium written grew 2.8 percent in the first half of 2020, up from the 1.0 percent growth a year earlier, but significantly below the 6.2 percent premium growth rate during the first quarter of 2020.

The disruptions to daily life and economic activity caused by the pandemic that began in March affected insurance premiums, a statement from Verisk and the APCIA said. For some commercial policies where premiums are determined by sales, payroll, or other activity-sensitive measures of exposure, economic events directly led to lower premiums, the statement said.

"Slow improvements in the financial performance of the US 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," Robert Gordon, senior vice president for policy, research, and international at APCIA, said in the statement. "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."

"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," Neil Spector, president of Insurance Services Office, Inc., a Verisk business, said in the statement. "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."