Combined ratio 100.3% for U.S. mutual insurers in 2015: A.M. Best

Mutual property & casualty insurers in the United States experienced more growth in their commercial business than in personal lines over the past five years, while improved pricing sophistication has led to lower loss ratios, A.M. Best Company suggested in a report released Thursday.

“Over the last five years, A.M. Best has seen many of the mutual carriers expanding into more of the small commercial market to stay competitive and shift away from personal lines challenges,” the Oldwick, N.J.-based ratings firm said in the A.M. Best special report, titled Mutual P/C Insurers Managing Market Challenges.

The data in the report is from 218 U.S. domiciled rating units as of Dec. 31, 2015. The report excludes risk retention groups.

Total net premiums written for the companies covered in the report were $144.643 billion in 2015, up from $140.31 billion in 2014 and $122.73 billion in 2011. All figures are in United States dollars.

Net premiums written in commercial were $40.56 billion in 2015, up 28% from $31.72 billion in 2011. Net premiums written in personal lines were $95.3 billion in 2015, up 15% from $83 billion in 2011.

Commercial lines made up 28% of the total net premiums written in 2015, compared to 25.8% in 2011. Personal lines made up the remaining 65.9% in 2015, up from 67.6% in 2011.

State Farm Group had 41% market share, of the mutual insurers covered in the report followed by Nationwide Group with 13.1% share and American Family Insurance Group with 5.1%. All other insurers had less than 5% market share each.

The loss ratio was 58.6% in 2015, down 0.1 points from 58.7 % in 2014 and down 11.4 points from 70% in 2011.

“Loss ratios continue to improve and stabilize from various rate actions, improved pricing sophistication, and milder weather patterns over the last three years, while evolving enterprise risk management programs, including technological investments and higher commission expenses, coincide with the increased premium growth and address the uptick in the expense ratio,” A.M. Best said in the report.

The combined ratio was 100.3% in 2015, up 0.5 points from 99.8% in 2014. That increase was “driven solely by the higher underwriting expense ratio.”

A.M. Best also broke down the loss ratio by line and year. In 2015, for example, loss ratios ranged from 36.1% in medical professional liability to 67.5% in private passenger auto liability.

In homeowners/farmowners multi-peril, the loss ratio was 52.6% in 2015, a 3-point improvement from 55.6% in 2014.

The loss ratio in inland marine was 45.9% in 2015, up 8.9 points from 37% in 2014.

“Overall, the direct incurred loss ratio was relatively flat over the last three years through 2015, with the exception of Texas and California, which saw an increase to the direct incurred loss ratio in 2015,” A.M. Best reported. “The main contributors to the increase were the Valley and Butte fires …. which raged across California for much of September, as well as statewide wildfires in Texas in October.”