There was some good news and the prospect of more in the property/casualty (P/C) insurance industryÃ¢â‚¬â„¢s first half 2010 results, announced yesterday.
A couple of takeaways: profits are recovering, industry capacity (policyholdersÃ¢â‚¬â„¢ surplus) is rebounding, and premium growth may be on the horizon.
The industryÃ¢â‚¬â„¢s net income after taxes (profit) rose to $16.5 billion in the first half, up from $6 billion in the first half of 2009. This pushed the industryÃ¢â‚¬â„¢s annualized statutory rate of return on average surplus to 6.3 percent during the first half, compared to 2.6 percent in the first half of 2009.
In his commentary on the results, I.I.I. president and economist Dr. Robert Hartwig says:
The first half figures are a welcome beginning to the year after several years of tough first halves. The results also bode well for the full year. During calendar year 2009 and 2008, the industryÃ¢â‚¬â„¢s full year returns were 5.8 percent and 0.6 percent, respectively.Ã¢â‚¬
Another piece of good news is that the industryÃ¢â‚¬â„¢s claims-paying capacity (as measured by policyholdersÃ¢â‚¬â„¢ surplus) remains at near all-time record highs. PolicyholdersÃ¢â‚¬â„¢ surplus increased by $19.1 billion or 3.7 percent to $530.5 billion, up from $511.4 billion at the end of 2009. Dr. Hartwig observes:
Dr. HartwigÃ‚ notes that while net written premiums were flat during the first half of 2010 Ã¢â‚¬“ the combination of a 1.3 percent decline during the first quarter and a 1.3 percent increase in the second Ã¢â‚¬“ the second quarterÃ¢â‚¬â„¢s gain snapped a 12-quarter losing streak during which premiums written had declined every quarter dating back to the second quarter of 2007.
Sequentially smaller declines in premium growth since mid-2009 combined with positive premium growth in the second quarter suggest that the free fall in premiums that began three years ago is now over. Moreover continued growth during the second half of 2010 would lock in positive premium growth for full-year 2010 and place the industry on a trajectory for positive premium growth in 2011.Ã¢â‚¬
The industry has not recorded positive premium growth on an annual basis since 2006.