The industry was off to a good start pre COVID-19 as it earned a ROE of 9.1% in 1Q19, the same as 1Q19, and slightly above the prior 10-year average. Growth in direct premiums written (DPW), at 4.3%. Aggregate net income was down 2.9% yoy to USD 14.62 bn, affecting industry surplus which dropped nearly 1% yoy to USD 790.9 bn. The COVID-19 pandemic has turned the industry outlook upside down, with premiums forecast to decline in 2020 for the first time since the Global Financial Crisis.
The industry was off to a good start pre COVID-19 as it earned a 1Q19 ROE of 9.1%, supported by rate increases in commercial lines.
Direct premiums written rose by a solid 4.3% in 1Q20 but are expected to decline in the following few quarters.
We expect rate hardening to persist in 2020.
The 1Q20 combined ratio adjusted for reserve developments improved slightly to 98.4.
For the remainder of the year, commercial lines are exposed to COVID-19 losses while personal auto is benefitting from a lower accident frequency.
Overall reserve releases were up from to the prior year but negative for commercial liability lines.
Investment results are likely to suffer significantly this year.
The overall 2020 industry outlook is subdued, with falling premiums and a squeeze on profitability.