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| [April 16, 2018] |
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Best's Special Report: Catastrophes, Tax-Reform Write-Downs Carve Into U.S. Property/Casualty Insurers' Net Income
A confluence of catastrophe losses and tax reform-related write-downs
led to U.S. publicly traded property/casualty (P/C) companies posting a
51.6% year-over-year drop in net income to $7.8 billion in 2017.
The Best's Special Report, titled, "Quick Look: U.S. P/C GAAP
Earnings Review-Year-End 2017," states that the deterioration in
financial performance largely was caused by higher-than-expected claims
from hurricanes and wildfires, and $10.3 billion in deferred tax asset
(DTA) write-downs stemming from the Tax Cuts and Jobs Act (TCJA).
Although expenses continued to outpace revenue, the gap tightened
because of a $5.2 billion year-over-year increase in premium revenue,
driven largely by rate increases in the personal and commercial auto
segments, as well as by a $2.3 billion increase in realized gains from
the strong equity market. Operating income was flat year-over-year, but
the cumulative change in deferred tax expenses or benefits recognized in
income from continuing operations resulted in the drop in net income.
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Overall, premium revenue grew 2.3%, constituting the main contributor to
the group's $8.9 billion increase in revenue. Net investment income grew
by 4.5%, but overall yield remains historically low. The $1.8 billion
increase in other revenue was driven by $1.1 billion in realized gains,
as companies cashed in on the rise in equity prices.
The TCJA-related write-downs diminished shareholders' surplus by $10.2
billion, or 2.8% of 2016 surplus. However, TCJA was not negative for all
companies, since some believe the new law makes them more competitive as
buyers in terms of mergers and acquisitions.
To access a full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=272642.
A.M. Best is the world's oldest and most authoritative insurance
rating and information source. For more information, visit www.ambest.com.
Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its
affiliates. ALL RIGHTS RESERVED.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180416005816/en/
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