During the nine-month period, underwriting expenses increased by 4.4% as some P/C companies recorded policyholder credits as an underwriting expense rather than a reduction of premium. Dividends to policyholders rose $3.2 billion from the prior-year period, as other companies provided refunds in the form of dividend payments. These factors, along with a 2.3% rise in incurred losses and loss adjustment expenses, led to the sharp net underwriting income decline.
The nine-month 2020 combined ratio for the P/C industry weakened slightly by 0.7 percentage points from the prior-year period to 98.7. AM Best estimates that catastrophe losses accounted for 8.3 points on the combined ratio, up from an estimated 4.4 points during the same period in 2019. The decline in net underwriting income, combined with declines in net investment and other income, reduced pre-tax operating income by 17.1%. Tax expenses were lower, but a $4.4 billion drop in realized capital gains contributed to a decline of 25.2% in the industry’s net income from the prior-year period to $35.5 billion.
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