According to an analysis conducted by ISO, profitability of property/casualty (P/C) insurance companies measured on a generally accepted accounting principles (GAAP) accounting basis lags behind other industries. The return on net worth for Fortune 500 combined companies for the years 2001 to 2010 exceeded the P/C industry in every year. Insurers are required to use statutory accounting principles (SAP), which are more conservative than GAAP, when filing annual financial reports with state regulators and the Internal Revenue Service. Insurers outside the United States use standards that differ from SAP and GAAP. Some insurers support a move toward uniform global standards. The P/C industry’s GAAP rate of return in 2010 was 5.6 percent, up from 5.0 percent in 2009.
ANNUAL RATE OF RETURN: NET INCOME AFTER TAXES AS A PERCENT OF EQUITY, 2004-2013
PROFITABILITY OF INSURERS IN THE FORTUNE 500
The chart below shows insurance industry profitability on a GAAP accounting basis for insurers featured in the Fortune 500.
ANNUAL RATE OF RETURN, GAAP ACCOUNTING, PROPERTY/CASUALTY, LIFE/HEALTH AND HEALTHCARE INSURANCE, 2007-2011 (1)