Net investment income in the U.S. property/casualty insurance segment hit a record high in 2023 of $73.9 billion, bolstered by the higher interest rate environment, according to a new AM Best report.

The Best’s Special Report, “US P/C Insurers Achieve Record Investment Income in 2023,” states that the net investment income improvement represented a 1.4% over the previous year. However, net investment income in 2022 was skewed by a $10.8 billion intercompany distribution at a very large reinsurer, which flowed through net investment income. Adjusted for this one-time transaction, the growth in the industry’s net investment income would have been nearly 20% in 2023. The heightened investment income helped marginally offset unfavorable performance in lines of business such as auto. As weather and catastrophe events increase, driving losses higher for property/casualty insurers, investment income has become that more important to make up for poor underwriting results.

“Aggregate net underwriting income has been volatile in the last 10 years—and often negative across the industry—and so investment income remains vital to earnings,” said Helen Andersen, industry analyst, AM Best. “Property/casualty carriers have had to balance their risk appetites with the need for higher returns when deciding on investment strategies in a rapidly changing economic landscape.”

The report notes that the property/casualty industry had shifted to riskier assets in its portfolio in the search for higher yields, but the percentage of Schedule BA assets within the total portfolio dropped to 6.6% in 2023 from 8.1% in the previous year. At the same time, the share of total stocks increased dramatically in 2023, to $667 billion from approximately $600 billion. Stocks as a percentage of surplus increased by about 10 percentage points, to 70%, as growth in stock holdings outpaced growth in surplus.

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=343153.

For a video discussion on this report and the 2023 investment results of the U.S. life/annuity and health segments, please go to http://www.ambest.com/v.asp?v=ambinvestment424.

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 London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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