The September issue of ICMIF Supporting Member AM Best’s monthly insurance magazine, Best’s Review, focuses on the mutual insurance sector in the USA.

Referencing the mutual sector as an important but often overlooked part of the US industry, Best’s Review features analysis and commentary on both the mutual life/health and property/casualty (P/C) segments:

• “U.S. Mutuals Find Stability Key Amid Turbulence Following a Good 2021” expands upon AM Best’s ranking of the top 25 US life/health mutual insurers with a profile of Penn Mutual Life Insurance Co.
• In “Expansion Spurs Growth for US P/C Mutuals Moving Up the Charts,” three property/casualty mutual insurers identify the keys to their increases in business.

The online magazine also includes the Top 25 US Life/Health Mutual Insurers, ranked by 2021 admitted assets; and the Top 25 US Property/Casualty Mutual Insurers, ranked by 2021 net premiums written.

In the editorial, Patricia Vowinkel, Executive Editor, writes “Mutual insurers represent a significant segment of the insurance industry, providing coverage for many millions of policyholders and yet they tend to fly under the industry radar. Mutual life insurers, for instance, had total admitted assets of USD 2.1 trillion in 2021 compared with USD 8.7 trillion for the entire life/health industry, or nearly 25% of the industry’s total admitted assets, according to AM Best data.”

Best’s Review covers emerging issues and trends and evaluating their impact on the marketplace. ICMIF members have access to the complete content of Best’s Review, available here.

2021 results flucuate for US P/C mutual insurers amind elevated losses

AM Best continued their analysis of the US mutual market in September, publishing a Best’s Market Segment Report, titled, “Results Fluctuate for Property/Casualty Mutual Insurers Amid Elevated Losses,”. Although AM Best-rated P/C mutual insurers grew premiums in 2021 and in the first half of 2022, elevated loss activity and equity market volatility so far this year have led to a notable drop in net income and a decline in policyholders’ surplus.

The report states that similar to the broader P/C market, mutual insurers continue to face market challenges, including rising inflation, supply chain shortages, active weather events and more costly reinsurance. In the first half of 2022, the population of P/C mutuals recorded negative net income following $12.0 of net income in the same prior-year period, as well as a USD 12.3 million underwriting loss. These results followed a year-over-year net income drop of 17.5% in 2021 and additional underwriting losses.

At the same time, net premiums written have continued to grow, as they have each year since 2010. Net premium growth in recent years has benefited from insurers placing a higher emphasis on rate adequacy, particularly in the personal auto lines as it has a disproportionate impact on the segment, and increasing reinsurance costs, which have been exacerbated by an elevated degree of weather-related events, specifically in the form of secondary perils.

“For the personal auto lines, the pandemic created a favorable financial shock and considerable improvement in incurred loss ratios in 2020,” said Lauren Magro, financial analyst, AM Best. “However, in 2021, the loss ratio deteriorated by 8.6 percentage points for private passenger auto liability and 16.5 points for auto physical damage, likely influenced by a return to normal frequency and a rise in severity due to inflation, supply chain pressures and labor shortages.”

The report notes that the homeowners’ loss ratio improved in 2021, but the improvement was more of a return to historically normal levels, and was not enough to offset the volatility in the personal auto line’s loss ratios.

At year-end 2021, P/C mutual insurers’ surplus stood at USD 422.3 billion, a 10% increase from the end of 2020, aided by positive equity market performance during the year. However, at the midpoint of 2022, surplus has dropped back to USD 381.3 billion, largely negating the previous year’s gain.

“Surplus growth is crucial for mutual companies, given their priority to reserve capital,” said Brian O’Larte, director, AM Best. “Based on these first-half results, 2022 is shaping up to be another challenging year for mutual insurers. Rate changes and pricing activity will remain a priority for mutual insurers.”

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=324053 .