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MYTHBUSTER!


2005 Was the Most Profitable Year Ever for the Insurance Industry; 2006 Also Showing Record Profits

Insurance industry profits hit record highs, despite Hurricane Katrina.

• The U.S. property/casualty industry's underwriting profit for the first half of 2006 was $15.1 billion - 31.8% higher than the first six months of 2005 which were already record-breaking.1
• The property-casualty insurance industry’s after-tax net income for 2005 was the highest ever, a record-breaking $44.8 billion!2 
• 2005 profits are up 18.7 percent over last year’s profit of 38.7 billion; 2004 had been the record until 2005.3
• The property/casualty industry’s surplus also is at the highest level ever, rising by more than 7 percent to nearly $427 billion.4

 

While telling lawmakers that payouts to injured consumers are costing insurers too much money, internally the insurance industry is celebrating these results.

• “’We've been through some of the worst natural disasters and man-made catastrophes in our history, and had some of the best earnings in the last 20 or 30 years,’ said Frank W. Nutter, president of the Reinsurance Assn. of America, a Washington trade group.”5
• In a commentary published in early 2006, Robert Hartwig, senior vice president and chief economist for the Insurance Information Institute in New York, noted that the surplus increase “was not expected’ in the wake of this year’s hurricanes.”  Commenting on the combined ratios, Hartwig “characterized it as ‘uncanny,’ adding that the ‘surprisingly low’ level stands as ‘stunning proof of the resilience of the industry.’”6

 

Updated October 6, 2006

 

NOTES

1 "BestWeek: US/PC Industry Registers First-Half Underwriting Profit," Business Wire, October 6, 2006.

2Peter G. Gosselin, “Insurers Saw Record Gains in Year of Catastrophic Loss; They say the profits are a fluke, but the industry has worked to shift risk to clients and the public,” Los Angeles Times, April 5, 2006.

3 Insurance Services Office, Inc. [ISO] & Property Casualty Insurers Ass"oc. of America [PCI], First Underwriting Profit Since 1978 and Investment Gains Propelled P/C Industry's Net Income and Surplus to Record Highs (April 12, 2005).

4 Ibid.

5 Peter G. Gosselin, “Insurers Saw Record Gains in Year of Catastrophic Loss; They say the profits are a fluke, but the industry has worked to shift risk to clients and the public,” Los Angeles Times, April 5, 2006.

6 “Despite Disaster Losses, Industry Profits Higher Through Nine Months,” January 2, 2006, National Underwriter.