Property-Casualty Insurance Industry Increases Profitability in 2020

Despite the impact of the COVID-19 pandemic, the US property-casualty insurance industry improved its overall profitability in 2020, according to A.M. Best.

For the year, the industry experienced a 68 percent increase in net underwriting income and saw its combined ratio improve slightly compared with 2019, A.M. Best said.

A.M. Best said the data, which is detailed in a special report titled "First Look: 12 Month 2020 Property/Casualty Financial Results," was collected from companies' annual statutory statements representing 95 percent of the US property-casualty industry's total net premiums written.

The A.M. Best report notes that pandemic-related stay-at-home orders and government-ordered business closures led to a reduction in insured exposures that prompted some property-casualty insurers to provide premium credits. As a result, insurers' underwriting expenses increased by 3.8 percent, A.M. Best said, with some companies recording those premium credits as underwriting expenses rather than premium reductions.

Dividends to policyholders increased by 76 percent in 2020 from the 2019 level, the rating agency reported, as other companies chose to provide refunds in the form of dividend payments.

Despite those increases, the US property-casualty industry's net underwriting income rose to $5.4 billion in 2020 from $3.2 billion in 2019, A.M. Best said.

The US property-casualty industry posted a 98.6 percent combined ratio in 2020, an improvement over the 98.9 percent combined ratio in 2019, according to the report. A.M. Best estimated that catastrophe losses were responsible for 8.0 percentage points of the combined ratio, up from an estimated 4.3 points in 2019.

Industry surplus increased 7.5 percent from the year-end 2019 level to $885.2 billion at the end of 2020, as $62 billion of net income and $46 billion from contributed capital and the net change in unrealized gains offset $46.9 billion of stockholder dividends, A.M. Best said.