Top trends in property and casualty insurance  August 7th 2023

Berkshire’s Geico swings to Q2 underwriting profit despite personal lines challenges

Berkshire Hathaway’s subsidiary Geico posted improved Q2 underwriting results in spite of the continued pressures affecting personal lines insurers over the last months.

Geico’s combined ratio decreased 10.3 points to 94.7%, fueled by higher average premiums per auto policy, a reduction in advertising costs and favorable reserve development. 

The insurer’s underwriting gain comes despite a challenged personal lines space, with the domestic auto industry facing inflationary pressures and some homeowners’ markets seeing a pullback from several carriers. 

As this publication has discussed, personal lines issues over the last few months have been driven by loss trends related to property damage and bodily injury, litigation and regulatory challenges. (See: July average personal auto rate change hits decade high of 10.7% as filing submissions slow.)

But in Q2, Geico’s improved results boosted Berkshire Hathaway’s overall performance, as the conglomerate reported $1.25bn underwriting earnings, nearly double the $715mn in Q2 last year.

Aon faces legal action over Vesttoo

Aon PLC disclosed in a stock market filing Friday that clients are taking legal action against the brokerage over transactions involving allegedly fraudulent letters of credit related to online reinsurance brokerage Vesttoo Ltd.

In its 10Q filing with the Securities and Exchange Commission detailing its second-quarter results, Aon said clients and counterparties have initiated or indicated they may initiate legal proceedings against Aon.

“The pending or threatened legal proceedings against the company allege, among other theories of liability, that in certain circumstances the company failed to comply with its alleged duty to procure appropriate letters of credit,” Aon said in the filing.

Swiss Re's P&C combined ratio strengthens as net income rises to $1.4bn

Global reinsurance giant Swiss Re has reported a significant rise in net income to $1.4 billion for the first half of 2023, driven by contained natural catastrophe losses, and a solid performance in all business segments during the period.

Group-wide, net income rose substantially from the $157 million recorded in H1 2022, supported by a profit of $804 million in the second quarter of 2023.

Return on equity (RoE) jumped from 1.6% in H1 2022 to 22.8% in H1 2023, as Swiss Re reports manageable natural catastrophe losses, and a robust performance in both its life and health (L&H) business and Corporate Solutions arm.

Across the group, net premiums earned and fee income increased by more than 4% to $22.1 billion in H1 2023.

Swiss Re’s return on investments totalled 2.8% at the half year compared with 1.2% a year earlier, as the return on investment continues to benefit from higher income.

Auto insurers drops of Kia, Hyundai coverage adding to churn

Recent moves by auto insurance carriers to drop coverage for Kia and Hyundai cars as theft risks, or more readily write off damaged Teslas as total losses, are adding to volatility in the auto insurance market, as seen in insurance shopping trends, according to a managing director at J.D. Power.

"With all the rate taking and pressure on the economy and pressure in the industry and loss ratios that's going on, you've seen a lot of shopping rates at all time high," said Martin Ellingsworth, executive managing director of P&C insurance intelligence at J.D. Power. The automotive data and intelligence company publishes quarterly and annual reports on shopping trends in auto insurance, which track when policyholders look to change carriers based on price. 

In early 2023, State Farm and Progressive announced they would no longer cover certain models of Kia and Hyundai cars that lacked electronic immobilizers, a standard anti-theft device in ignitions. 

Separately, these two carriers, along with Geico and Farmers, were the subject of disputes by Tesla over their more readily "totaling" low-mileage Tesla cars that had been in accidents, because of high repair costs, according to Reuters. 

Progressive, Geico and Farmers did not respond to requests for comment.

State Farm replied, stating that it "has stopped accepting new customer applications in some states for certain model years and trim levels of Hyundai and Kia vehicles because theft losses for these vehicles have increased dramatically. This is a serious problem impacting our customers and the entire auto insurance industry. We take seriously our responsibility to manage risk and the impact of excess claim costs on all our customers. In this case, it became necessary to take action to protect our policyholders and our business."

The carrier added that it is monitoring this issue and would "adjust our approach as appropriate."

Deciphering the designation: CPCU

Why are designations important to insurance professionals?

In addition to each state mandating specific requirements to maintain your license, pursuing additional knowledge can unlock new opportunities and long-term success. Selecting the appropriate insurance training programs will enhance your expertise, elevating the value you provide to your agency and clients.

The chartered property casualty underwriter (CPCU) is one of the most well-known, and equally well regarded, designations granted by the American Institute for Chartered Property Casualty Underwriters, or The Institutes as it is more colloquially known. The designation was established in 1942 by academic leadership from the Wharton School of the University of Pennsylvania.

According to The Institutes, 98% of those that earn a CPCU designation gain a skill they can apply right away to their job, while 95% said the designation positioned them for new opportunities.