US Property and Casualty Industry Records Strong First-Half 2024 Gains

The US property and casualty (P&C) insurance industry recorded a $3.8 billion net underwriting gain in the first half of 2024, a notable turnaround from the $24 billion underwriting loss during the same period in 2023, according to a report from A.M. Best. This improvement reflects enhanced personal lines results and a rise in net investment income. The report, titled "First Look: Six-Month 2024 US Property/Casualty Financial Results," captures preliminary data from insurers, representing approximately 99 percent of total industry net premiums written.

A.M. Best also reported a decrease in catastrophe-related losses, which accounted for 7.4 points on the industry's combined ratio in 2024, down from 9.7 points in 2023. This drop was largely attributed to fewer severe convective storm losses, which had a substantial impact in the previous year. Convective storms, which include thunderstorms, tornadoes, and hail events, often lead to large-scale damage across multiple states, driving up insurance claims. In 2023, these storms reached record levels, significantly affecting underwriting results. However, milder weather in 2024 helped ease this pressure, contributing to a more favorable loss environment for insurers.

As a result, the P&C industry's combined ratio—a key measure of profitability that compares losses and expenses to premiums earned—improved to 97.7 from 104.4 in the previous year. A combined ratio under 100 indicates an underwriting profit, while a ratio over 100 reflects a loss. The improvement in 2024 signals stronger underwriting performance, helped in part by reduced catastrophe losses and improved results in personal lines.

In addition to improved underwriting results, the industry's pretax operating income surged to $47.3 billion in the first half of 2024, compared with $10.0 billion in the same period in 2023. This was driven by a 26.6 percent increase in net investment income. The boost in investment income underscores the importance of insurers' investment portfolios, which generate returns that can help offset underwriting losses, especially during challenging periods.

A notable $50 billion swing in net realized capital gains at National Indemnity Company, a Berkshire Hathaway subsidiary, further propelled the industry's overall net income to $97.6 billion, a dramatic increase from $9.4 billion in 2023. National Indemnity Company's large investment portfolio played a critical role in this income surge, as the company realized significant profits from the sale of appreciated assets. This underscores the impact that large insurers with diversified investments can have on overall industry financial results.

In parallel, the US P&C mutual insurance segment faced ongoing volatility due to persistent inflation and severe weather events, as outlined in another A.M. Best report, "US Property/Casualty Mutual Insurers Resilient Despite Perpetual Volatility." Underwriting losses for US P&C mutual insurers rose by 17 percent in 2023, totaling $36.6 billion. Despite these challenges, mutual insurers benefited from a 26 percent increase in net investment income, totaling $23.4 billion for 2023, which helped mitigate the impact of higher reinsurance costs and regulatory hurdles surrounding rate increases.

"Many insurers are receiving rate increases, but there has been pushback," said Lauren Magro, financial analyst at A.M. Best. Regulatory differences by state have led to delays in rate approvals, creating further challenges for insurers.

Mutual insurers have pursued rate adequacy and are expected to continue implementing additional rate increases throughout the remainder of 2024 and into 2025. Net premiums written for the mutual segment rose by nearly 13 percent in 2023, the highest growth in a decade. Meanwhile, policyholders' surplus for the US P&C mutual segment reached just under $400 billion by the end of 2023, recovering slightly due to a rebound in the equity market, which contributed to $18 billion in unrealized capital gains.

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