Underwriting Losses Persist in US Property and Casualty Industry

The US property and casualty (P&C) industry continues to grapple with underwriting challenges, with a net underwriting loss of $21.2 billion recorded in 2023, as per a recent AM Best report. While this figure represents a slight improvement compared to the $24.9 billion loss in the prior year, it underscores persistent pressures within the industry.

The preliminary findings are outlined in the latest Best's Special Report titled First Look: 2023 US Property/Casualty Financial Results. Data for the report was collected from companies' annual statutory statements received as of March 8, 2024, covering an estimated 97 percent of the total P&C industry's net premiums written.

According to the report, the industry's combined ratio experienced a marginal improvement, decreasing by 0.9 percentage points to 101.6 in 2023. Notably, catastrophe losses accounted for an estimated 8.7 points on the combined ratio, up from 7.3 points in 2022, primarily driven by record severe convective storm losses.

Despite a 9.9 percent growth in net earned premiums, the underwriting loss persisted due to a 10 percent increase in incurred losses and loss adjustment expenses, a 6.4 percent rise in other underwriting expenses, and a 4.5 percent increase in policyholder dividends.

While net investment income remained relatively stable compared to the prior year, the reduced underwriting loss in 2023 contributed to a 4.8 percent increase in pretax operating income, totaling $50.0 billion. Additionally, a significant $51.1 billion change in net realized capital gains at National Indemnity Company led to a substantial increase in net income for the industry, which more than doubled to $90.1 billion.

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