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P/C Insurers Full Year Results Deteriorated in 2011

Private U.S. property/casualty insurers’ net income after taxes fell to $19.1 billion in 2011 from $35.2 billion in 2010, with insurers’ overall profitability as measured by their rate of return on average policyholders’ surplus dropping to 3.5 percent from 6.6 percent
April 24, 2012

Private U.S. property/casualty insurers’ net income after taxes fell to $19.1 billion in 2011 from $35.2 billion in 2010, with insurers’ overall profitability as measured by their rate of return on average policyholders’ surplus dropping to 3.5 percent from 6.6 percent. Driving the declines in insurers’ net income and overall rate of return, net losses on underwriting grew to $36.5 billion in 2011 from $10.5 billion in 2010. The combined ratio—a key measure of losses and other underwriting expenses per dollar of premium—deteriorated to 108.2 percent in 2011 from 102.4 percent in 2010, according to ISO, a Verisk Analytics company, and the Property Casualty Insurers Association of America.

The deterioration in underwriting results is primarily attributable to a spike in net losses and loss adjustment expenses (LLAE) from catastrophes. ISO estimates that insurers’ net LLAE from catastrophes rose to $38 billion in 2011 from $14.3 billion in 2010. These amounts exclude LLAE that emerged after insurers closed their books for each year but do include late-emerging LLAE from events in prior years. Partially offsetting the deterioration in underwriting results, net investment gains—the sum of net investment income and realized capital gains (or losses) on investments—grew $2.8 billion to $56.2 billion in 2011 from $53.4 billion in 2010. Full Report

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