In 2023, net investment income for the US property/casualty insurance sector reached a record $73.9 billion, boosted by higher interest rates, according to a new report by AM Best, a credit rating agency for the insurance industry.

The Best’s Special Report, “US P/C Insurers Achieve Record Investment Income in 2023,” reveals that net investment income rose by 1.4 percent over the previous year, reaching $73.9 billion. However, 2022’s figures were skewed by a $10.8 billion intercompany distribution from a large reinsurer.

Without this one-time event, net investment income growth in 2023 would have been nearly 20 percent. This increased investment income helped offset poor performance in sectors like auto insurance.

With rising weather and catastrophe-related losses, investment income is becoming crucial to counteract 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,” commented 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.”

According to the report, the P/C industry sought higher yields by moving towards riskier assets in its portfolio. However, the proportion of Schedule BA assets decreased to 6.6 percent in 2023 from 8.1 percent the previous year.

Conversely, the total value of stocks in the portfolio saw a significant rise, reaching $667 billion, up from around $600 billion. As a result, stocks as a percentage of surplus increased by about 10 percentage points, reaching 70 percent, as the growth in stock holdings outpaced the growth in surplus.

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