US P&C Insurers Achieve Record $73.9B Investment Income in 2023

Net investment income in the US property-casualty (P&C) insurance segment reached a record high of $73.9 billion in 2023, driven by a higher interest rate environment, according to a new report by AM Best.

The Best's Special Report, US P/C Insurers Achieve Record Investment Income in 2023, indicates that the net investment income improvement marked a 1.4 percent increase over the previous year. However, net investment income in 2022 was skewed by a $10.8 billion intercompany distribution at a large reinsurer, which impacted the net investment income figures. When adjusted for this one-time transaction, the industry's net investment income growth in 2023 would have been nearly 20 percent. This increase in investment income provided some offset to the unfavorable performance in certain lines of business, such as auto insurance. With rising losses due to weather and catastrophe events, investment income has become increasingly crucial to counterbalance poor underwriting results.

"Aggregate net underwriting income has been volatile in the last 10 years—and often negative across the industry—and so investment income remains vital to earnings," said Helen Andersen, industry analyst at AM Best. "Property-casualty insurers have had to balance their risk appetites with the need for higher returns when deciding on investment strategies in a rapidly changing economic landscape."

The report highlights a shift in the property-casualty industry's investment portfolio toward riskier assets in search of higher yields. However, the percentage of Schedule BA assets within the total portfolio decreased to 6.6 percent in 2023 from 8.1 percent in the previous year. Conversely, the share of total stocks increased significantly, rising to $667 billion from approximately $600 billion. Stocks as a percentage of surplus grew by about 10 percentage points, reaching 70 percent, as the growth in stock holdings outpaced the growth in surplus.

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