Fitch: U.S. P/C Personal Lines Results Decline Despite Auto Improvement

Underwriting losses in the U.S. P/C personal lines segment moved higher for the fourth straight year in 2017, though this time another segment drove the increase, according to Fitch Ratings in a new report.

Personal lines are the largest major segment in the P/C industry representing 55 percent of industry net written premiums. The industry statutory personal lines combined ratio rose to 103.8 percent in 2017 despite moderate improvement in the personal auto segment.

Following four consecutive years of strong underwriting gains in the homeowners’ segment, industry underwriting results in homeowners insurance turned sharply unfavorable last year with the combined ratio rising to 107 percent due to higher catastrophe-related losses.

“The homeowners’ line is traditionally a more volatile product segment, which experienced a higher combined ratio than personal auto for the first time since 2012,” said Managing Director James Auden.

By contrast, personal automobile insurance, responsible for much of the underwriting losses in each of the three years prior due to inadequate pricing and adverse claims trends, is showing some improvement. Though underwriting losses were sizeable again in 2017, the combined ratio fell by nearly four points to 102.6 percent for the year.

Personal auto has been the fastest growing major industry segment over the last two years with over 7 percent net written premium growth.

“Growth for auto insurance premiums is likely to continue in 2018 due to favorable price movements,” said Auden.

This could help to shift fortunes for a market segment that has not earned an underwriting profit in over a decade.

Going forward, the outlook is more encouraging for both personal auto and homeowners insurance. Auto insurance is positioned to move closer to a 100 percent combined ratio in 2018 while the homeowners line will likely return to a solid underwriting gain this year, barring unusually large catastrophe loss experience.

The report reviews market share and underwriting performance trends for leading writers in both personal auto and homeowners. Despite less favorable industry performance a few individual insurers stand out for top tier results in both segments.

Source: Fitch Ratings