SPECIAL REPORT
Special Report: U.S. P/C Industry Marks Third Consecutive Underwriting Gain, but Surplus Declines on Investment Results

The U.S. property/casualty (P/C) industry marked a third consecutive year of underwriting profitability, with $6.2 billion in underwriting income in 2015 (Exhibit 1). However, the lower level of underwriting income and an 11.2% decline in net investment income drove both pre-tax operating and net income down from their 2014 levels. The combination of lower net income and a negative change in the industry’s accumulated unrealized gain position resulted in a $1.5 billion reduction in policyholders’ surplus (PHS), to $688.6 billion at year-end 2015, a decline of 0.2% (Exhibit 2). After-tax return on equity (ROE) also declined, to 8.1% from 9.2% in 2014, driven by the lower level of net income.