Income in the US property/casualty insurance industry has fallen 9.3% to $28.3bn after tax in the first half of 2006 after investment results deteriorated.
According to ISO and the Property Casualty Insurers Association of America (PCI), net income dropped from $31.2bn in the first six months of 2005.
Contributing to the decline in net income after taxes and overall profitability was a slide in the industry's net investment income — primarily dividends from stocks and interest on bonds — which dropped 3.5% to $24.5bn in the first half of this year from $25.4 billion in 2005.
Realized capital gains on investments, which are not included in net investment income, tumbled 66.4% to $0.9bn. Overall, net investment gains fell 9.3% to $25.4 billion through the first half of 2006 from $28bn.
“While the hurricane season isn't over and the potential for catastrophic losses from a natural disaster still remains, insurers' underwriting results for first-half 2006 were very solid,” said Genio Staranczak, PCI chief economist. “At 92 percent, the combined ratio for first-half 2006 was the best first-half combined ratio since the start of quarterly records extending back to 1986.
“Even if we aren't struck by any major storms, we are already seeing signs that recent results are spurring increased competition in insurance markets not exposed to hurricanes and that increased competition will eventually undermine premium growth and underwriting results,” noted Michael R. Murray, ISO assistant vice president for financial analysis.
