Property/casualty insurers saw their net income and profitability soar during the first nine months of 2015, though the challenging investment environment reduced yields.

Those findings are part of a new report from ISO (part of Verisk Analytics), and the Property Casualty Insurers Association of America. The report’s authors caution, however, that the market is turning in some key areas.

First, the 2015 nine-month results:

• Net income after taxes hit $44 billion in the first three quarters of 2015, up from $37.8 billion over the same period in 2014.
• The Insurance Information Institute noted that the $44 billion in net income is the highest three-quarter total since 2007. As well, the Institute added that the nine-month results were positive, but also showed effects of severe spring weather and winter storms.
• Additionally, profitability as measured by insurers’ rate of return on average policyholders’ surplus hit 8.8 percent through Q3 2015, versus 7.6 percent in the first nine months of 2014.
• As well, insurers’ combined ratio nit 96.9 over the first nine months of 2015, better than the 97.7 over the same period in 2014.

Net investment income ticked higher to $34.8 billion for Q1-3 in 2015, versus $34.5 billion the previous year. Realized capital gains ticked slightly higher to $8.9 billion, compared to $8.8 billion in the first three quarters of 2014. As a result, net investment gains for the industry hit $43.7 billion for the first nine months of 2015. However, the first three quarters of 2015 reflect a difficult investment climate. They collectively had a 3.1 annual investment yield during that period, which is “significantly below long-term averages” and not likely to improve for a while, ISO Solutions President Beth Fitzgerald said in prepared remarks.

Robert Gordon, PCI’s senior vice president for policy development and research, noted that surplus and premium to surplus continued to “hover near historic levels” during the first nine months of 2015.

“However, premium growth continues to be sluggish for personal lines,” Gordon cautioned in prepared remarks. “Additionally, some industry statistics we’re monitoring indicate that the combined ratio for personal auto insurance has worsened, driven by increases in both accident severity and frequency.”

The report’s assessment of Q3 2015 results mirrors the favorable numbers from the year’s first three quarters. Among the results:

• The P/C insurance industry’s consolidated net income was $14.1 billion, up from $11.8 billion in the 2014 third quarter.
• Net written premiums were $136 billion, a 4.1 percent jump from $130.7 billion in the 2014 third quarter.
• P/C insurers’ annualized rate of return on average surplus was 7.8 percent, versus 7 percent in Q3 2014.

Source: ISO/Verisk, Property Casualty Insurers Association of America