The U.S. property/casualty insurance segment posted record-high investment income of $89 billion in 2024, a notable 20% year-over-year increase bolstered by the higher interest rate environment, according to a new AM Best report.

The Best’s Special Report, “Investment Income Reached Record Heights for P/C Insurers in 2024,” notes that the annual increase was driven by returns on bonds and cash and short-term investments. After over a decade of persistently low interest rates, the Federal Reserve raised rates by 425 basis points between 2022 and 2024, causing bond prices to fall below their carried values. However, the well-matched and shorter duration portfolios of most property/casualty insurers limited the overall impact. As interest rates rose, returns increased due to reinvestment into higher-yielding securities, boosting net investment income materially.

“As weather and catastrophe events increase and drive losses higher for some property/casualty insurers, investment income has become even more important to make up for poor underwriting results,” said Kaitlin Piasecki, industry research analyst, Industry Research and Analytics, AM Best.

With new money being reinvested into higher-yielding assets, the segment’s gross yield rose by 40 basis points to 3.66% in 2024. Bonds remain the largest asset class for property/casualty insurers, and the portfolio yield reached 4.1% in 2024, a record high in more than a decade. Overall portfolio allocations have fluctuated in recent years due to equity market volatility and increased cash and short-term investments; however, trends are generally driven by larger players, as Berkshire Hathaway accounted for nearly 40% of the segment’s invested assets in 2024.

“There has been a slight increase in private securities over the last decade,” said Jason Hopper, “Property/casualty insurers also continue to favor and find value in residential mortgage-backed securities over commercial mortgage-backed securities, with mortgage-backed securities accounting for 11% of the industry’s allocations, compared with 5% for commercial mortgage-backed securities.”

To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=358060.

For a look at the U.S. life/annuity industry’s 2024 investment results, please see the Best’s Special Report, “US Life/Annuity Insurers Embrace Alternatives and Mortgages in 2024,” see http://www3.ambest.com/bestweek/purchase.asp?record_code=355833.

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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