Best’s Special Report: U.S. Property/Casualty Industry’s Surplus Declined by 9.3% in First Quarter 2020

The U.S. property/casualty (P/C) industry’s surplus level decreased by 9.3% to $744.9 billion in the first quarter of 2020, compared with year-end 2019, based on preliminary results detailed in a new Best’s Special Report, titled, "First Look: 3-Month 2020 Property/Casualty Financial Results."

Part of that drop-off in surplus was attributed to an $83.4 billion change in net unrealized capital losses. These findings are based on data derived from companies’ three-month 2020 first quarter statutory statements received by AM Best as of May 19, 2020. These companies accounted for an estimated 95% of total U.S. P/C industry net premiums and 93% of policyholder surplus.

The report notes that the overall impact from the Covid-19 pandemic was limited in the first quarter 2020 reporting period and that there were greater changes in line of business underwriting results than normal, with personal lines displaying favorable movement. AM Best anticipates that the impacts will be considerably more apparent in second quarter 2020 results.

Jennifer Marshall, director, AM Best, said an initial look at the U.S. P/C industry’s statutory results for the first quarter showed that investments overall for this sector seem to have held up well, with the exception of equity holdings. Total equity holdings were down approximately $103 billion in the first quarter of 2020 compared with the same prior-year period, or about 21%. This returned the value of industry’s equity-level holdings to almost its year-end 2018 level.

"At this point, the best we can reasonably expect would be a continued improvement in equity markets through the end of the (second) quarter," Marshall said. "We do anticipate a heightened level of investment market volatility to continue until the threat of COVID-19 abates. Net investment income may be affected as dividends received may decline with the reduction or suspension of dividends on owned equities."

Marshall said another factor being monitored is the impact of widening credit spreads on bond holdings, as well as negative credit actions, particularly those that result in ratings moving below investment-grade. That would cause the valuation of those holdings to switch to mark-to-market, potentially adversely impacting capital levels.

With net investment and other income declining slightly in the first quarter of 2020 from the prior-year period, the improvement in underwriting income drove the 4.0% growth in pre-tax operating income. As the tax expense remained flat and realized capital gains declined $172.0 million, industry net income increased 3.5% from the prior year period to $17.7 billion.

The combined ratio for the U.S. P/C industry improved slightly from the prior year period to 95.2. AM Best estimates that catastrophe losses accounted for 3.2 points on the first quarter 2020 combined ratio, unchanged from an estimated 3.2 points in the prior-year period.

To access the full copy of this special report, please visit

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Matthew Coppola
Director, Data Management
+1 908 439 2200, ext. 5627

Jennifer Marshall
+1 908 439 2200, ext. 5327

Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jim Peavy
Director, Public Relations
+1 908 439 2200, ext. 5644