Profitability of property/casualty (P/C) insurance companies using generally accepted accounting principles (GAAP) lags other industries. The median return on shareholders’ equity for the Fortune 500 Combined Industrial and Service Businesses for the years 2005 to 2014 exceeded that of 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 2014 was 7.5 percent, down from 8.9 percent in 2013.
ANNUAL RATE OF RETURN: NET INCOME AFTER TAXES AS A PERCENT OF EQUITY, 2005-2014