OLDWICK, N.J.--(BUSINESS WIRE)--Net premiums written (NPW) in the U.S. property/casualty mutuals market grew at a moderate pace of 3.1% in 2015, and have grown each year since 2010 at a compound average rate of 3.4%, according to a new A.M. Best special report.
The Best’s Special Report, titled, “Mutual Property/Casualty Insurers Managing Market Challenges,” states NPW growth over the last five years is attributed to rate actions, as dominant players in the mutual space maintain a considerable market share. The 10 largest mutual insurers in this population represented more than 70% of NPW in 2015. While this population is diverse, State Farm Group dominates in terms of market share with 41% of the market and Nationwide Group follows at 13%. As in the case with the overall property/casualty market, competition in the mutual space continues to remain heightened.
In this most-recent five-year period, 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. Since 2011, commercial lines’ NPW has grown by a total of 28% while personal lines’ NPW has grown by 15%, with personal lines now representing 66% of the total NPW, versus 68% five years ago. Gradually shifting away from personal lines goes hand in hand with the product line diversification that has been demonstrated by the rated mutual companies.
This population of mutual companies reported a solid year of underwriting performance, with a stable loss ratio of 58.6 and a combined ratio of 100.3 in 2015. Both metrics are virtually unchanged from the previous year, and represent an improvement in operating performance compared with earlier years in the most-recent five-year period. Most notably, a decrease in catastrophic weather-related events in the last three years has contributed heavily to the favorable results. However, despite the stable loss ratios in recent years, an elevated underwriting expense ratio continues to marginally compress underwriting measures. The report notes that a significant percentage of A.M. Best-rated mutual companies are geographically concentrated, with more than 40% writing in one state in 2015, and this concentration can expose companies to risks from extreme weather-related events.
Despite these market challenges and above-average expense ratios, the steady loss ratios and net investment income in recent years have aided profitability while product diversification has helped to alleviate concentration risk. In the mutual company organization structure, policyholders maintain a defined set of rights and they also have ownership interests. Accordingly, the mission and performance expectations for a mutual can vary widely from those of its stock counterpart. In today’s challenging operating environment, A.M. Best believes well-managed companies stand out regardless of organizational structure.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=254027.
To view a video about this report with A.M. Best Financial Analyst Kim Muccia, please visit http://www.ambest.com/v.asp?v=mutual916.
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