News
Insurance facing 'most disrupted personal lines environment' Kemper CEO has seen
Kemper Corporation expects to achieve an underwriting profit in the second half of 2023, after reporting a $16.9 million net operating loss in Q2 and exiting the preferred home and auto insurance market, its CEO has said.
The insurer’s preferred property and casualty (P&C) business, which includes eight underwriting companies and generates around $500 million in written premium, had been under strategic review since November 2022.
The wind-down of the business will enable the redeployment of more $300 million in capital to Kemper’s core segments, according to James McKinney, Kemper chief financial officer.
Kemper’s actions come amid “the most disrupted personal lines environment” it has ever experienced, Kemper president, CEO and chairman Joe Lacher told analysts during the insurer’s Q2 earnings call
Munich Re posts H1 profit of €2.4bn, "on track" to achieve annual target
Munich Re generated a profit of €2.4bn in H1 of 2023, higher than half of its full year guidance of €4bn, as the firm remains “on track” to achieve its annual target.
The firm explained that the higher result during H1 of 2022 was attributable to lower unwinding-of-discount effects and lower major loss expenditure.
Insurance revenue from insurance contracts issued rose year on year to €14.175bn, up from €13.772bn in Q2. For H1, this figure increased to €28.448bn (27.033bn in the same period last year).
Meanwhile, the total technical result in Q2 amounted to €2.159bn, and the investment result rose to €596m from €317m last year.
Munich Re generated a profit of €1.154bn for Q2 of 2023, down somewhat from €1.585bn in the same quarter last year.
Liberty Mutual Insurance Reports Second Quarter 2023 Results
Liberty Mutual Holding Company Inc. and its subsidiaries (collectively "LMHC" or the "Company") reported net loss attributable to LMHC of $585 million and $660 million for the three and six months ended June 30, 2023, versus net loss attributable to LMHC of $343 million and income of $155 million for the same periods in 2022.
"During and subsequent to the quarter end, we announced key organizational changes and executive leadership appointments aimed at enhancing focus on long-term strategic markets, while better leveraging scale advantages to drive target profitability and sustainable success," said Tim Sweeney, Liberty Mutual President & Chief Executive Officer. "We have announced agreements to divest our GRM West operations in Europe and Latin America, and our GRS Liberty Specialty Markets direct insurance business operations in Brazil, Chile, and Colombia. This allows us to elevate our US-focused personal and small commercial business into a standalone business unit, called US Retail Markets or (USRM) and consolidate our international operations under one umbrella in Global Risk Solutions."
"For the second quarter, we reported a net loss attributable to LMHC of $585 million, primarily driven by elevated catastrophe losses from widespread wind and hail events in Texas, Oklahoma, and Colorado," said Sweeney. "We have and continue to take rate and underwriting action to address the inflationary pressures in personal lines felt across the industry, resulting in a 4.7-point improvement in the underlying loss ratio in our Global Retail Markets business in the quarter. Despite elevated catastrophes, our Global Risk Solutions business is continuing to drive progress towards our combined ratio targets with improvement in the underlying loss ratio of 0.4pts in the quarter."
The tables below outline highlights of LMHC's consolidated financial results for the three and six months ended June 30, 2023.
AIG's Zaffino tops 2022 P&C insurance CEO pay list
American International Group Inc.'s top boss Peter Zaffino benefited from a massive stock award to finish 2022 as the highest-paid CEO among US-listed property and casualty or multiline insurers, according to an S&P Global Market Intelligence analysis.
Zaffino became AIG's CEO in March 2021 and chairman of the board in January 2022. He received $62.4 million in stock grants in 2022, which made up the majority of his $75.3 million in total adjusted compensation for the year. The rest of the total comprised cash compensation of $1.8 million, $3.2 million in options and $7.8 million in non-equity incentive plan compensation.
The 2022 annual total compensation of the median employee identified by AIG was $84,240, reflecting a 1-to-894 ratio with Zaffino's total pay for the year, the highest difference among the top 10 CEOs in the analysis.
According to AIG's proxy statement, the compensation package included $50 million in restricted stock as part of an employment agreement to keep Zaffino as CEO until 2027. Excluding this stock award, Zaffino's compensation during 2022 was $22.9 million with a pay ratio of 1-to-272.
Hagerty Inc. CEO McKeel Hagerty ranked second in terms of total compensation, at $34.3 million, which consisted of $1.1 million in cash and $33.2 million in stocks. At 790.6%, Hagerty's salary is the largest increase year over year for a CEO in the analysis. Data was not available to compare this figure to the median salaried employee at the company.
Zaffino had the second-largest increase year over year, as his compensation rose 243.8%. William Berkley of W. R. Berkley Corp. came in a distant third for percentage pay increases among the 10 highest paid CEOs with a rise of 16%. Overall, Berkley was the fifth-highest-paid CEO, with Evan Greenberg of Chubb Ltd. and Alan Schnitzer of The Travelers Cos. Inc. filling the third and fourth positions, respectively.
Greenberg received $25.2 million in total adjusted compensation, 346 times the median salary of a Chubb employee and an 8.5% increase from 2021.
Schnitzer received total adjusted compensation of $21.1 million, 194 times the median salary of a Travelers employee and an 8.7% jump from 2021.
Mitchell: EVs remain more expensive, time consuming to repair
Electric vehicles continue to cost more money and be more time consuming to repair compared to internal combustion engine (ICE) vehicles, according to a new analysis.
Mitchell’s Plugged in: EV Collision Highlight found that during Q2, severity costs were higher for EVs by $963 in the U.S. and $1,328 in Canada. For Tesla specifically, costs were $1,589 and $1,600 higher respectively, Mitchell said.
“When we looked at EVs compared to ICE vehicles, they’re significantly more expensive,” Ryan Mandell, Mitchell’s claim performance director, told Repairer Driven News. “We also have to keep in mind that these are newer vehicles, and their average cash value vehicles are much greater than the average ICE vehicle in general.”
He added: “And so when we see that, it makes sense that we’re going to expect there to be a higher cost of repair for these vehicles just based on those facts alone.”
The report also noted that EVs continue to take more time to repair with an average of 8.51 refinish hours, compared to 8.02 refinish hours for ICE vehicles.
“When we start thinking about the EV, its engineering, the way it’s designed and the fact that you have to manage the high voltage battery during the course of the repair, which involves additional labor. All these things will add additional costs beyond just the fact that this is a newer more expensive vehicle,” Mandell said.
Mitchell’s survey found OEM parts utilization to be higher among EVs as well, with 90.75% using original parts versus 66.5% for ICE vehicles. EV repairs required a lower percentage of parts as well.
Mandell attributed the higher use of OEM parts among EVs to the fact that there simply isn’t a matured aftermarket available within the EV space, which is largely limited to recycled or original parts for repairs.
Insurance Company Invents System To Determine Accident Damage on the Spot
Allstate Insurance, one of the largest insurers in the United States, has recently patented a technology that eliminates the need for an inspection appointment to assess the damage resulting from an accident.
The patent is called "machine learning-based accident assessment" and describes a system that automatically collects collision information from a vehicle.
Before delving into more details about the proposed technology, let's detail the process of accident damage assessment relying entirely on human power.
A driver involved in an accident must make an appointment for an inspection to determine the extent of damages. However, the inspection isn't typically possible on the spot and depends on the inspector's availability. Furthermore, drivers might have to transport their vehicles to the headquarters of an insurance company, resulting in additional costs, especially if towing is required.
The primary objective of the new technology is to determine whether the accident resulted in a total loss, eventually being able to provide information on the passengers' condition too. The system can help improve safety and reaction time, especially after severe collisions.
Independent agents saw largest growth in homeowners lines in 2022
The independent agent channel placed 63% of the P&C insurance written in the U.S. in 2022, according to the latest market share report from the Big “I” – an increase of 3% over the previous five years’ average.
Overall surplus lines placement grew by 2% in 2022 from the five-year average, but private flood surplus lines saw the most dramatic increase – jumping to a 45% utilization rate in 2022 compared to an average of 36% over the previous five years.
The amount of commercial lines placement by the independent agency channel stayed steady from the previous year at 87%, but placement grew in personal lines from 37% in 2021 to 38% in 2022. According to the report, personal lines penetration has trended upward over the last five years.
Homeowners saw the largest independent agent channel penetration increase among personal lines, going from 46% in 2018 to 50% in 2022. Direct written premiums increased from $785 billion in 2021 to $861 billion in 2022.
Commentary/Opinion
How Litigation Funding is Affecting Settlement Strategies, Costs
The August issue of Best’s Review features the effects from litigation funding on settlement components.
“How Litigation Funding Is Affecting Settlement Strategies, Costs indicates that claims and legal experts are calling for consistent disclosure requirements as the growing practice exhibits a greater impact on the insurance industry.
AM Best's Monthly Insurance Magazine
InsurTech/M&A/Finance/Collaboration
North American insurance underwriter deal activity rises YOY in H1'23
Deal activity involving North American insurance underwriters bounced higher year over year in the first half of 2023, but the aggregate value of those transactions was fairly flat.
There were 69 underwriter M&A transactions in North America in the first half of the year, according to an S&P Global Market Intelligence analysis, compared to 55 in the prior-year period. Deal activity increased as the year went on, with 39 transactions in the second quarter and 30 in the first quarter.
Despite the solid increase in the total number of deals, the aggregate transaction value of those deals only ticked up to $12.53 billion from $12.51 billion in the first half of 2022.
Much of the underwriter M&A in the first half of the year was driven by sellers that wanted to hone their portfolios to focus on their core businesses, according to Piper Sandler analyst Paul Newsome.
"You saw folks take businesses that weren't necessarily a natural home in their current portfolio and push them to the buyer who felt that they were better," Newsome said in an interview. "The theme recently has been more of companies trying to do more of what they already do."
AI in Insurance
QBE expert on AI and the “holy grail” of insurance
“We truly believe that AI [artificial intelligence] will disrupt and transform the insurance sector,” said Alex Taylor (pictured above), global head of emerging technology for QBE Ventures, the venture investment and development arm of QBE Insurance Group.
He said this transformation is likely to involve how AI can process unstructured data.
“There’s this holy grail that’s been in insurance for a very long time now in unstructured data processing,” said Sydney-based Taylor. “Insurance has got very good at structured data processing, that’s our bread and butter.”
Taylor was addressing a webinar last month hosted by the insurtech, Kanopi and Amazon Web Services (AWS): Demystifying Generative AI: Perceptions, Opportunities and Challenges.
He said the industry has spent the last 30 years finding better ways to manage and process structured data to price policies more effectively. This data is often text and numbers that insurers can extract from customers and their policies in a specific format.
Taylor said processing unstructured data, - which includes text and numbers and also video and images - can involve 100s of pages of submitted data, particularly in complex product lines.
“These are the things that require manual work and it can take days at a time to understand exactly what you need to know to underwrite a particular policy,” he said.
Taylor said AI offers the opportunity to solve this challenge by understanding what’s happening much faster and without human labour.
Canada
Peer to peer car sharing turns a corner, but insurance bumps still ahead
Are you ready for Airbnb, but for cars?
When Jennifer Cummings flew down to Florida from St. John's, NL, last summer, she opted to arrive in style. The 41-year-old signed on to a “peer-to-peer” car-sharing site and rented a gleaming white Alfa Romeo SUV - from its private owner.
“I went for the most exotic-looking car that was somewhat in my price range,” Cummings said of the Italian luxury vehicle, which cost her $150 for a 24-hour stint.
“I felt very important driving in Florida to the beaches for the day in this fancy European car.”
Meanwhile, her mom - with her on the Fort Lauderdale trip - wound up renting the exact same car she drives at home. “Could you be more boring?”
Their sunshine getaway happened just months after Cummings became a “host” on Turo, one of several car-share platforms that run on a so-called peer-to-peer model - the same platform she used to rent the Alfa Romeo.
It's like Airbnb, but for cars.