Property/casualty insurer and reinsurer operating earnings in North America dipped in 2016, hammered by factors including higher catastrophe losses, low investment yields and underwriting deterioration, Fitch Ratings said in a new report.

The main finding: a decline in aggregate operating return on average equity to 6.6 percent in 2016. That’s down from a 7.4 percent return produced in 2015. What’s more, aggregate operating earnings dipped in 2016 to the lowest they’ve been since 2011, which is the last time when insurers dealt with significant global catastrophe losses.

Fitch’s finding based on an assessment of 2016 GAAP results for 43 property/casualty insurers and reinsurers.

The results show that carriers continue struggling to generate an operating return on average equity above 10 percent. According to Fitch, just 10 companies in the group reported a full-year 2016 double digit operating return on average equity.

“Specialty insurers were the only group to report material improvement in return on average equity,” Fitch director Christopher Grimes said in prepared remarks. “Personal lines and reinsurance produced the strongest operating returns among insurers over the last five years; however, reinsurers reported the weakest net premium growth due to pricing competition.”

Other data and conclusions from the Fitch report:

• The aggregate group calendar year combined ratio came in at 96.7, 2.2 percentage points higher than last year. More catastrophe losses and reduced gains from favorable prior year reserve development were to blame.

• Insured catastrophe losses were $12.6 billion in 2016, more than 50 percent higher than the previous year. Prior period loss reserve releases, excluding American International Group results, dropped 17 percent in 2016 to just under $8 billion.

• While Fitch maintained a stable outlook for the commercial property, personal and reinsurance sectors, it also carried a negative sector outlook for each. The reason: the industry has reached a point in its underwriting cycle when “near-term conditions and profitability are likely to worsen further” before underwriting changes and pricing can improve things.

Source: Fitch Ratings