Property-Casualty Insurers Poised for Improved Underwriting Profits

North American property-casualty insurance companies are positioned for improved underwriting profits in 2022 due to continued commercial lines pricing trends favorable to insurers and likely stabilization of their personal auto business, according to Fitch Ratings.

Fitch said the 2021 generally accepted accounting principles full-year results for a peer group of 45 North American property-casualty insurers and reinsurers showed premium growth and generally strong underwriting results. Claims losses and other pandemic-related effects fell significantly in 2021 compared to 2020, the rating agency said.

The improved 2021 underwriting performance for commercial insurers and reinsurers in the group was driven by favorable loss ratios in liability lines and lower expense ratios on an expanded premium base, Fitch said. "Specialty underwriters posted the best combined ratio of all subsegments, driven by outsized improvement in rate increases and higher demand, particularly in specialty and excess and surplus," a Fitch statement said.

The property-casualty insurers net investment income increased by 14 percent in 2021, Fitch said, reflecting improvement in alternative investment valuations, while yields for new money fixed-income investments remained historically low. Fitch noted that as interest rates remain low, underwriting profit improvement has become increasingly important for the insurers to achieve target returns on capital.