Property & Casualty Insurance Industry

U.S. Property & Casualty and Title Insurance Industries ¨C 2022 Full Year Results

Property & Casualty Insurance Industry

OVERVIEW

The property & casualty insurance industry has faced one of the toughest

operating environments in recent years, with rising loss costs stemming from

inflation, supply chain issues, and natural catastrophes. The growth in earned

premium was far outpaced by higher losses and LAE incurred, resulting in the

steepest underwriting loss since 2011.

Investment gains offset the underwriting loss, but net income for the

industry was 35.6% lower than 2021. The investment yield was nearly a

percentage point higher, due in part to an increase in investment income

earned, but largely due to a weakened balance sheet resulting from lower

investment valuations driven by a downturn in the financial market.

Policyholders¡¯ surplus declined 7.1% since the prior year end driven by large

unrealized capital losses. Return on surplus declined to 3.7% versus 5.9% last

year.

Inside the Report

Page No.

Market Conditions ...................... 2

Premium ..................................... 3

Underwriting Operations ......... 5-7

Investment Operations ............... 8

Net Income ................................. 9

Cash Flow & Liquidity .................. 9

Capital & Surplus......................... 9

Reserves .................................... 10

Reinsurance .............................. 11

Title Industry ............................. 15

U.S. Property and Casualty Insurance Industry Results

For the year ended

December 31,

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

781,624

719,927

658,913

642,984

621,786

561,952

537,926

524,006

506,657

486,462

8.5%

15.5%

6.7%

5.9%

(22,108.8%)

752,562

499,476

75,362

200,635

(24,574)

693,777

432,600

70,655

189,526

(111)

646,014

383,308

69,888

179,964

12,100

630,776

378,582

69,244

173,055

8,373

603,188

366,258

64,658

168,228

2,907

549,958

353,954

65,218

151,672

(22,459)

533,236

323,195

61,829

148,692

(1,700)

515,835

296,749

60,932

145,753

11,453

497,931

284,934

58,706

139,846

14,658

476,792

263,576

56,951

136,586

20,127

Net Loss Ratio

Expense Ratio

Combined Ratio

3.8 pts

(0.7) pts

2.9 pts

76.4%

25.7%

102.5%

72.5%

26.3%

99.6%

70.2%

27.3%

98.7%

71.0%

26.9%

98.7%

71.4%

27.1%

99.1%

76.2%

27.0%

103.9%

72.2%

27.6%

100.5%

69.3%

27.8%

97.8%

69.0%

27.6%

97.3%

67.2%

28.1%

96.0%

1yr Rsrv Devlp/PY PHS

0.2 pts

(0.5%)

(0.7%)

(0.8%)

(0.8%)

(1.6%)

(1.4%)

(0.7%)

(1.2%)

(1.4%)

(2.7%)

Net Invmnt. Inc. Earned

Net Realized Gains (Loss)

Net Invmnt. Gain (Loss)

31.2%

(90.9%)

(0.1%)

69,440

1,654

71,094

52,936

18,204

71,139

51,596

11,064

62,660

55,132

11,260

66,392

53,287

10,885

64,172

48,978

19,833

68,812

45,539

8,747

54,286

47,228

10,285

57,513

46,401

12,006

58,407

46,594

18,823

65,417

3.24%

2.58%

2.75%

3.02%

3.06%

3.08%

3.01%

3.18%

3.17%

3.34%

Net Premiums Written

Net Premiums Earned

Net Losses Incurred

Loss Expenses Incurred

Underwriting Expenses

Underwrting Gain (Loss)

Investment Yield

Total Other Income

YoY Chg

(in millions, except for percent)

8.6%

0.67 pts

Net Income1

(43.7%)

(35.6%)

1,979

38,951

3,514

60,449

1,034

59,196

1,284

62,229

1,530

57,565

(4,687)

38,717

950

42,860

1,475

56,884

(2,908)

56,439

(580)

69,725

Return on Revenue

(3.2) pts

4.7%

7.9%

8.4%

8.9%

8.6%

6.3%

7.3%

9.9%

10.1%

12.9%

December 31,

YoY Chg

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

Policyholders' Surplus2

Return on Surplus

(7.1%)

(2.2) pts

1,000,893

3.7%

1,077,866

5.9%

955,136

6.4%

891,214

7.4%

779,921

7.4%

786,016

5.1%

734,026

6.0%

705,948

8.1%

706,740

8.1%

686,135

10.7%

1. Excludes investment income from affiliates. 2. Adjusted to eliminate stacking

? 2023 National Association of Insurance Commissioners

[1]

U.S. Property & Casualty and Title Insurance Industries ¨C 2022 Full Year Results

MARKET CONDITIONS

Premium Pricing

After recovering from challenges stemming from the pandemic, the U.S. property & casualty insurance industry is

facing a hard market cycle primarily due to the combination of historic high inflation, supply chain disruptions, and

natural catastrophes which have created economic uncertainty. According to the Council of Insurance Agents and

Brokers (CIAB) Q4 2022 Market Report, average commercial premiums increased by 8.0% across all lines, marking 21

consecutive quarters of price increases. Commercial auto rates increased 7.3% in the fourth quarter, marking 42

consecutive quarters of rate increases within this line.

All Commercial LOBs

Commercial Auto

Workers' Comp

Commercial Property

General Liability

Umbrella

25%

Commercial Property, 16.0%

20%

15%

10%

5%

(5%)

1Q

2Q

3Q

2018

4Q

1Q

2Q

3Q

4Q

1Q

2Q

2019

3Q

4Q

1Q

2020

2Q

3Q

4Q

2021

1Q

2Q

3Q

4Q

2022

Source: The Council of Insurance Agents & Brokers, Commercial Property/Casualty Market Index ¨C Q4/2022

Although average premium rates continued to rise, respondents noted a moderation in most major commercial lines,

with the exception of commercial property, where premiums increased by an average of 16.0%, due to inflation.

According to the CIAB, the primary way inflation influences premiums is through increased property valuations. As

building materials and labor prices increase, the amount an insurer would have to pay to replace or rebuild damaged

property increases, requiring a higher premium. In addition to higher rates, carriers have tightened underwriting

guidelines by raising deductibles and implementing more restrictive terms on property risks.

Capacity

Net writings leverage rose to 78.1% from an alltime low of 66.8% a year ago, as the effects of

high inflation, supply chain problems, and aboveaverage losses from natural catastrophes led to

a moderate decline in policyholders¡¯ surplus. The

deterioration also reflected a rebound in

premium volume following the slowdown

caused by COVID. However, the property &

casualty industry is still in a good position for

future growth.

Net Writings Leverage

100%

95%

90%

85%

80%

78.1%

75%

70%

65%

60%

? 2023 National Association of Insurance Commissioners

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

[2]

U.S. Property & Casualty and Title Insurance Industries ¨C 2022 Full Year Results

PREMIUM

Direct premiums written (DPW) increased 9.6% year-on-year (YoY) to $874.5 billion in 2022. This is the second

consecutive year of a near double-digit YoY increase following the pandemic and the largest YoY increase over the past

ten years, which has averaged 5.3%. Furthermore, direct premium growth occurred across nearly all lines of business.

The only lines of business with YoY premium contraction were financial and mortgage guaranty, international, and

warranty.

Growth in the current year reflects higher rates in response to the various market challenges that were mentioned

previously. The increase in property insurance rates was largely due to economic inflation and supply chain problems,

which are driving replacement costs higher. Commercial liability rates have also increased partly due to social inflation.

Social inflation is a term used to describe the rising costs of insurance claims resulting from increased litigation,

broader definitions of liability, more plaintiff-friendly legal decisions, and larger compensatory jury awards.

DPW in the personal lines market represented 45.1% of total DPW at $394.8 million. Personal auto liability and

homeowners premiums increased 4.8% and 11.7%, respectively, while auto physical damage premiums decreased

2.8%.

Commercial DPW ($in billions)

Personal Lines DPW ($in billions)

180.0

120.0

160.0

100.0

140.0

80.0

120.0

60.0

100.0

40.0

80.0

20.0

60.0

0.0

13

14

15

16

17

Prvt. Psgr. Auto Liab.

18

19

20

21

22

Auto Phys. Dmg.

Home

13

14

15

16

17

18

19

20

21

22

Commercial MP

Other Liab.

Work Comp

Comm Auto Liab

Commercial lines DPW increased 7.4% to $320.3 million, representing 36.6% of total DPW. All major lines saw a

premium increase, with the largest commercial line, other liability claims-made and occurrence, increased 8.4% to

$114.6 million. DPW in workers¡¯ compensation, commercial multiple peril, and commercial auto liability increased

8.9%, 10.8%, and 9.0%, respectively.

Assumed premiums written increased 9.8% YoY to $733.8 billion, of which 88.4% was affiliated assumptions. U.S.

intercompany pooling agreements comprised 60.9% of reinsured business, followed by 25.6% affiliated non-pooled

business. Ceded premiums written amounted to $826.7 billion, a 10.8% increase compared to last year. Overall, net

premiums written (NPW) increased 8.6% to $781.6 billion.

The table on the following page shows change in DPW and pure direct loss ratio (PDLR) by state.

? 2023 National Association of Insurance Commissioners

[3]

U.S. Property & Casualty and Title Insurance Industries ¨C 2022 Full Year Results

Direct Writings & Profitability by State and Territory (in Millions except for percent)

Sta te

AL

AK

AR

AR

CA

CO

CT

DE

DC

FL

GA

HI

ID

IL

IN

IA

KS

KY

LA

ME

MD

MA

MI

MN

MS

MO

MT

NE

NV

NH

NJ

NM

NY

NC

ND

OH

OK

OR

PA

RI

SC

SD

TN

TX

UT

VT

VA

WA

WV

WI

WY

AS

GU

PR

VI

MP

Totals

Di rect Premi ums Wri tten

Cha nge

2022

8.1%

8.3%

11.0%

9.2%

7.9%

11.5%

6.3%

7.8%

11.9%

14.1%

9.4%

10.1%

14.2%

9.2%

9.9%

13.6%

12.6%

7.6%

8.1%

8.3%

7.4%

7.2%

5.8%

10.7%

8.0%

9.0%

12.7%

13.7%

8.8%

7.4%

7.6%

9.1%

7.2%

10.4%

21.3%

7.3%

10.2%

9.8%

6.3%

6.6%

9.7%

20.4%

9.6%

13.7%

13.2%

5.3%

9.0%

8.6%

6.4%

9.9%

9.4%

(12.6%)

12.4%

6.5%

(6.0%)

7.2%

11,716

1,853

15,629

7,015

103,941

18,256

10,652

3,515

2,606

75,735

29,010

3,183

4,397

33,302

14,925

9,149

8,890

9,250

14,388

3,002

14,796

19,647

22,571

15,533

6,847

15,553

3,464

6,905

7,673

3,045

26,679

4,409

58,978

21,718

3,629

21,194

10,306

9,367

30,133

3,069

13,282

3,671

15,561

80,475

7,181

1,493

18,084

16,579

3,341

13,366

1,594

0

385

2,844

165

24

9.6%

874,538

2021

Pure Di rect Los s Ra ti o

Los s es Incurred

Cha nge

2022

2021

2022

2021

10,841

(2.2) pts

1,711

1.4 pts

14,087

6.1 pts

6,422

23.0 pts

96,312

6.3 pts

16,368

(4.0) pts

10,016

0.4 pts

3,262

14.2 pts

2,328

5.2 pts

66,401

34.4 pts

26,513

10.3 pts

2,891

(1.2) pts

3,849

(1.3) pts

30,485

3.6 pts

13,581

3.7 pts

8,055

(2.5) pts

7,896

17.1 pts

8,600

(2.7) pts

13,306 (108.2) pts

2,771

3.9 pts

13,781

12.0 pts

18,331

6.3 pts

21,331

6.7 pts

14,037

28.6 pts

6,343

0.4 pts

14,263

5.1 pts

3,073

10.5 pts

6,073

42.5 pts

7,050

10.4 pts

2,834

7.6 pts

24,785

(4.5) pts

4,041

8.7 pts

55,034

2.3 pts

19,677

1.9 pts

2,991 (18.5) pts

19,747

11.9 pts

9,354

2.3 pts

8,533

2.3 pts

28,339

4.2 pts

2,880

(0.7) pts

12,104

9.8 pts

3,049

36.4 pts

14,200

3.8 pts

70,774 (10.7) pts

6,344

4.0 pts

1,417

9.4 pts

16,597

5.8 pts

15,263

6.4 pts

3,141

3.4 pts

12,160

12.8 pts

1,457

(1.7) pts

0 (36.1) pts

342

9.7 pts

2,669

19.9 pts

176

(4.9) pts

22 (183.3) pts

59.6%

49.2%

67.6%

87.5%

62.6%

59.1%

61.4%

66.6%

51.5%

94.7%

73.5%

45.8%

60.9%

61.4%

59.7%

59.2%

72.5%

65.9%

59.8%

51.9%

65.8%

54.7%

70.3%

87.7%

60.5%

63.3%

75.2%

97.8%

69.0%

52.8%

61.3%

68.1%

63.9%

60.3%

73.5%

65.5%

64.7%

62.2%

62.5%

54.2%

65.5%

101.7%

63.2%

68.3%

59.8%

54.5%

59.5%

68.5%

57.5%

66.9%

44.6%

(153.7%)

58.0%

32.3%

22.4%

2.8%

61.9%

47.8%

61.5%

64.5%

56.2%

63.1%

61.0%

52.4%

46.3%

60.3%

63.2%

47.0%

62.2%

57.8%

56.0%

61.7%

55.4%

68.6%

168.0%

48.0%

53.7%

48.4%

63.6%

59.1%

60.1%

58.1%

64.7%

55.3%

58.6%

45.2%

65.8%

59.4%

61.6%

58.4%

92.0%

53.6%

62.4%

59.9%

58.3%

54.9%

55.7%

65.2%

59.4%

79.0%

55.8%

45.1%

53.7%

62.1%

54.1%

54.1%

46.3%

(117.6%)

48.3%

12.4%

27.3%

186.1%

6,765

880

10,112

5,952

63,161

10,283

6,364

2,287

1,268

66,957

20,497

1,404

2,514

19,631

8,590

5,210

6,156

5,918

8,237

1,506

9,443

10,415

15,481

13,155

4,014

9,530

2,500

6,512

5,158

1,555

15,924

2,911

36,578

12,565

2,609

13,430

6,408

5,554

18,332

1,618

8,335

3,574

9,557

51,916

4,055

796

10,384

10,959

1,870

8,679

681

(0)

216

911

36

1

6,476

798

8,329

4,021

51,888

9,876

5,908

1,641

1,032

37,927

16,128

1,310

2,282

16,743

7,361

4,815

4,235

5,737

21,611

1,285

7,217

8,560

13,336

8,028

3,669

8,027

1,887

3,263

3,955

1,245

15,770

2,328

32,545

11,080

2,688

10,216

5,645

4,951

15,997

1,553

6,518

1,931

8,133

53,362

3,374

625

8,651

9,121

1,669

6,426

643

(0)

159

319

51

38

67.2%

62.2%

797,706

5.0 pts

? 2023 National Association of Insurance Commissioners

565,140

477,463

Premi ums Ea rned

2022

2021

11,343

1,789

14,966

6,803

100,913

17,397

10,365

3,433

2,462

70,681

27,895

3,066

4,128

31,953

14,385

8,806

8,491

8,980

13,774

2,900

14,357

19,032

22,013

15,005

6,638

15,066

3,325

6,656

7,474

2,947

25,978

4,273

57,238

20,838

3,550

20,515

9,907

8,930

29,309

2,987

12,729

3,515

15,111

75,973

6,784

1,460

17,466

16,002

3,250

12,968

1,527

0

373

2,822

162

22

10,469

1,670

13,543

6,235

92,253

15,649

9,692

3,134

2,229

62,851

25,510

2,786

3,667

28,959

13,138

7,807

7,645

8,369

12,862

2,674

13,429

17,684

20,955

13,594

6,109

13,810

2,915

5,896

6,749

2,756

23,982

3,920

52,792

18,988

2,923

19,077

9,044

8,259

27,432

2,831

11,698

2,960

13,689

67,546

6,044

1,386

16,115

14,699

3,084

11,871

1,388

0

330

2,563

186

20

840,904

767,181

[4]

U.S. Property & Casualty and Title Insurance Industries ¨C 2022 Full Year Results

UNDERWRITING OPERATIONS

The industry posted a $24.6 billion underwriting loss,

the worst since 2011 as inflation and natural

catastrophes drove a sharp deterioration in personal

lines. Although the commercial market outperformed

the personal market, commercial carriers also

experienced challenges in 2022. Higher loss costs on

commercial property lines were also due to inflation

and natural catastrophes, while social inflation

impacted certain liability lines. Overall, industry net

premiums earned increased 8.5% while losses and LAE

incurred increased 14.2% resulting in a net loss ratio of

76.4%. Underwriting expenses increased 5.9% but less

than the increase in net premiums written, resulting in

a slightly lower YoY expense ratio of 25.7%. The

combined ratio was 102.5%, the highest since 2017

when the industry experienced a historic year of

natural disasters, including Hurricanes Harvey, Irma,

and Maria.

U/W Income ($B)

Combined Ratio

$30

110%

$20

105%

$10

$0

100%

($10)

95%

($20)

($30)

13

14

15

16

17

18

19

20

21

22

90%

Sharp Deterioration in Personal Lines

The personal lines market comprised 56.1% of the industry¡¯s net losses and LAE incurred in 2022. The combined ratio

for this segment reached a 15-year high at 110.1%, driven primarily by poor personal auto results.

Combined Ratio

115.0%

Personal

Commercial

All Lines

110.1%

110.0%

105.0%

100.0%

95.0%

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Personal Auto

Historically, underwriting results within the personal auto space were relatively stable until 2020, when the pandemic

started. Insurers that year reported much stronger than usual results due to the drastic drop in miles driven and

returned approximately $14 billion in premiums to policyholders. The combined ratio for private passenger auto

liability in 2020 was 94.8%, a 6.8-point improvement compared to 101.6% for 2019. Since then, insurers have faced an

uphill battle. In 2021 when miles driven returned to normal, auto insurers reported worsening loss ratios due to an

increase in the frequency and severity of accidents. In 2022, personal auto liability and physical damage lines together

generated a $26.5 billion underwriting loss, dragging down the overall underwriting results.

? 2023 National Association of Insurance Commissioners

[5]

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