US property & casualty outlook 3Q19
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The US P&C industry delivered an ROE of 7.6% annualized in 9M19, down from 8.3% in 9M18, but slightly above the prior 10-year average for 9M. Direct premiums written (DPW) advanced by a reasonably solid 4.6% yoy, albeit slower than last year. We see some further deceleration ahead as personal auto and workers' comp softness outweighs an acceleration in liability lines. Despite a historically roughly average cat loss burden, claims and loss adjustment expense growth in 9M19 was moderately faster than premium growth, but growth in other underwriting expenses was more modest. In total, the net underwriting gain of USD 5.6 bn was up about 20% yoy.
- The industry delivered an ROE of 7.6% in 9M19, above the prior 10- year average for 9M.
- Commercial lines pricing continues to improve, but may not necessarily be enough to offset rising loss costs.
- Personal auto competition is up; FastTrack results suggest pressure on loss severity.
- Reserve releases are decelerating, though interim quarters may not be the best predictor for the full year.
- The current investment yield is expected to remain roughly flat.