I.I.I. Economic Snapshot

P/C industry results

  • The chart shows: Industry net income after taxes for the first half of the year (adjusted for inflation).
  • The takeaway: Even before three major hurricanes and the California wildfires, profits were declining for 2017.

P/C industry net income after taxes*

Billions, 2017 dollars

*Through second quarter. Adjusted for inflation using the BLS CPI calculator, to 2017 dollars.

Sources: A.M. Best Special Report, ”A.M. Best First Look – 2Qtr 2017 U.S. Property/Casualty Financial Results”; ISO, a Verisk Analytics company; Insurance Information Institute.


 

  • The chart shows: The green bars are underwriting profit or loss for the first six months of each year. The blue bars are net investment gains (investment income net of capital gains or losses) for the same period.
  • The takeaway: A long-term downtrend in interest rates has steadily lessened net investment gains.

Key sources of P/C insurer profits

$ Billions

Data are before taxes and exclude extraordinary items.

Sources: NAIC data, sourced from S&P Global Market Intelligence; Insurance Information Institute.

  • The chart shows: The blue shows net investment income for the first six months of each year. The green shows realized capital gains or losses for the same period.
  • The takeaway: Net investment income, the heart of insurer profits, has been declining steadily for more than a decade.

Sources of investment gains

Billions

Through second quarter.

Sources: ISO/PCI; Insurance Information Institute.

  • The chart shows: Quarterly yields on Moody’s seasoned AAA bonds.
  • The takeaway: Bond yields have continued to fall and it looks unlikely they will recover much for a while.

Bond yields

 

Note: Recession indicated by gray shaded column.

Sources: https://fred.stlouisfed.org/series/AAA#0 ; National Bureau of Economic Research (recession dates); Insurance Information Institute.

  • The chart shows: change in the core consumer price index. (Core means excluding food and energy, which fluctuate a lot.)
  • The takeaway: Inflation has been in a narrow range (2 percent or so) since 2012.

Change* in the core** Consumer Price Index

 

*Monthly, year-over-year, through October 2017. Seasonally adjusted. **CPI less food and energy.

Sources: US Bureau of Labor Statistics; National Bureau of Economic Research (recession dates); Insurance Information Institute.