News
P&C industry persevered in Q2 through storms, catastrophic reserve charge | S&P Global Market Intelligence
Rapidly improving private auto results helped the US property and casualty industry in the second quarter to significantly narrow its underwriting losses on a year-over-year basis, keeping a projected return to profitability for the full calendar year on track.
The industry's combined ratio of 101.2% in a quarter where the P&C industry amassed a net underwriting loss of $5.19 billion represented a decline of 5.4 percentage points from the year-earlier period when losses spiked to $15.48 billion. The comparison is even more favorable when excluding the impact of an extraordinary commercial auto reserving action.
Like the second quarter of 2023, P&C insurers faced elevated catastrophe losses from severe convective storms, but headwinds from the private auto business substantially dissipated, leading to marked improvement on the bottom line.
For the first half of 2024, the industry remains firmly in the black with a combined ratio of 97.6% and a net underwriting gain of $5.01 billion as compared with a combined ratio of 104.4% and net underwriting loss of $22.80 billion in the year-earlier period. S&P Global Market Intelligence has projected that the industry's two-calendar-year stretch of underwriting losses would come to an end in 2024 based on our forecast combined ratio of 99.0%.
Tim Zawacki is a principal research analyst covering the U.S. insurance industry for S&P Global Market Intelligence
Update: U.S. Insurance Industry Begins to See Surplus Recovery, Boosted by First Half Capital Gains and Signs of U.S. Property and Casualty Firms Inching Towards Stabilization
Verisk (Nasdaq: VRSK), a leading global data analytics and technology provider, and The American Property Casualty Insurance Association (APCIA), the primary national trade association for home, auto and business insurers, today reported that half-year 2024 gains for the insurance industry are estimated to be $95 billion. Adjusting for over $50 billion in capital gains realized by one insurer, first half 2024 gains are estimated to be approximately $45 billion. According to key financial indicators for private U.S. property/casualty insurers, while the first half of 2024 experienced similar losses for insurers as those seen in 2023, the losses are no longer reducing surplus as they did over the past few years.
However, when adjusting for inflation, current surplus has still not recovered to the levels seen in early 2022, when surplus decline began. Additionally, given the ever-increasing impact of extreme weather patterns, and new exposures and risks such as cyber, a higher level of surplus may be required.
“While there are some positive signals in the 1H2024 results, insurers are still recovering from significant underwriting losses in recent years,” said Robert Gordon, senior vice president of policy, research, and international at APCIA. “Insurers’ underwriting income swung from a $22.6 billion loss in the first half of 2023 to a $4.7 billion gain at 1H2024.
Aon on the state of the global insurance market in Q2 2024
The global insurance market in the second quarter of 2024 continued its growth trajectory, underpinned by strong profitability reported by many insurers in 2023 and improvements in the reinsurance sector.
According to the latest report from Aon, the market remained focused on disciplined underwriting and pricing strategies aimed at long-term profitability and program stability. Insurer growth ambitions contributed to a competitive and well-capitalized environment, with ongoing price moderation, flexible underwriting, and the availability of various coverage options, particularly for preferred risk categories.
During Q2, competition driven by insurer growth ambitions created favorable conditions in the Property market for many risks. The US market, in particular, saw its most favorable conditions in nearly seven years, with pricing outcomes for desirable risks ranging from single-digit increases to low double-digit decreases.
However, market conditions were more challenging in regions such as the Nordics, Brazil, and Mexico, as well as in certain high-risk sectors, where placement outcomes were less favorable.
Aon noted that US casualty exposures, both domestic and international, faced increased scrutiny due to concerns over reserve deterioration from previous years and ongoing issues related to nuclear verdicts and adverse litigation trends.
“A capacity-rich market focused on sustainable growth and program stability is good for our clients, many of whom are taking advantage of the current market conditions by restoring coverages and limits,” Aon commercial risk CEO Joe Peiser (pictured) said.
Reinsurers' profitability up on underwriting, investments
Merger and acquisition activity in the reinsurance market slowed in 2024 as market conditions shifted to organic growth.
Global reinsurance companies should continue seeing favorable earnings for the rest of 2024 and into 2025, according to a recent report by Fitch Ratings.
Non-life reinsurers posted improved underwriting profitability in the first half of 2024 from the first half of 2023, with manageable losses from catastrophes, the data showed. Premium growth is also likely to continue, although at a slowed rate amid a more competitive market.
Meanwhile, life and health reinsurer profitability varied based on mortality and morbidity experience, although revenue growth was strong.
Fitch Ratings said shareholders' equity grew 6% in the first half of 2024 from the end of 2023 due to increased underwriting, investment income and equity market gains:
"Companies will continue to maintain very strong capitalization as they prudently manage capital, likely continuing to increase share repurchases and dividends in second half of 2024 and 2025 as growth opportunities lessen and investors demand return of capital."
At the same time, merger and acquisition activity in the reinsurance market slowed in 2024 as market conditions shifted to organic growth, the data showed, with market valuations for companies moving higher, and making likely acquisitions more expensive.
Fitch Ratings said merger and acquisition activity could return as organic opportunities slow and the market inevitably turns soft again.
Research
Enterprise Study Shows Gen Z and Millennials Driving More Than Other Generations
[Ed. Note: Baty Boomers 1946-1964; Gen X 1965-1980, Gen Y (Millennials) born 1981-1994, Gen Z born 1995-2012
New data from Enterprise Mobility found that Gen Z and millennials are driving more than any other generational age group.
According to Enterprise Mobility’s first “On the Move” mobility survey, found that 47 percent of Gen Z and 41 percent of millennials estimate they are driving more than they did five years ago, compared to 33 percent of Gen X and 16 percent of baby boomers.
The study also found that 73 percent of surveyed Americans expect privately owned vehicles to remain their top choice of transportation 10 years from now. Many admit that vehicles can cause stress, and 45 percent agree that their commute would improve if they cost less money.
“As we look toward the future, it’s important for us to stay informed about consumer perspectives on the current state of mobility,” Enterprise Mobility Executive Vice President of Global Operations Will Withington said.
LexisNexis® Insurance Demand Meter Shows Record Growth as U.S. Consumer Auto Insurance Shopping and New Policy Growth Hit "Nuclear" Volumes for the First Time in the Same Quarter
For the first time since LexisNexis® Risk Solutions began benchmarking U.S. consumer auto insurance shopping, policy growth and channel trends more than a decade ago, both quarterly year-over-year shopping and new policy growth registered as 'Nuclear' on the LexisNexis® Insurance Demand Meter.
Attributed to consumers motivated to shop amid increasing premiums for both auto and home insurance, along with increased marketing by insurance companies, the double-digit growth for both shopping and for new policies in force could portend a staggering amount of insurance shopping and new policies as the industry emerges from its profitability concerns in 2023.
Key Takeaways
U.S. consumer insurance shopping clocked in at 'Nuclear' on the Insurance Demand Meter, as the quarterly year-over-year shopping growth rate grew 16.1% for Q2 2024 (up from last quarter's 2.9% increase).
Quarterly year-over-year growth for new policies is also "Nuclear," with a 19.5% increase for Q2 2024 (up from 8.7% last quarter).
By the end of Q2, the annual shop rate had risen to a record 42.3%, led by four states with annual year-to-date shop rates over 50% (Texas, Fla., Ga., Ariz.).
At the end of the quarter, 21% of the auto policies-in-force were written in the last 12 months.
Carriers reinstated marketing and new business lead purchasing in Q2 to take advantage of rate-driven shoppers that included both non-standard and long-tenured customers. Direct-to-consumer (non-agent based) distribution channels grew 38%, while captive agent and independent agent channels grew 2.4% and 8.9%, respectively.
New policy volumes dipped slightly from May to June, causing shopping growth to outpace new policy growth in June for the first time since April 2023.
Study: Car Insurance Prices Will Jump 22% This Year - Kelley Blue Book
Car Insurance has become more expensive in 2024, and the increases may not be over. A new study projects that by the end of the year, the average policy will cost 22% more than it did a year ago.
The number comes from Insurify, an insurance comparison shopping service. Data scientists from Insurify “examined more than 97 million rates in its proprietary database, quoted via integrations with partnering insurance companies” in all 50 states and the District of Columbia.
InsurTech/M&A/Finance💰/Collaboration
Life360 expands partnership with Arity, pursues Credit Karma's insurance strategy
Life360 held its FQ2’24 earnings call on August 8, 2024, led by co-founder and CEO Chris Hulls.
Key highlights:
Life360 reported a 20% year-on-year increase in Q2 revenue, reaching $84.9 million. The company’s free member base grew by 4.3 million monthly active users, totaling 70.6 million, a 31% increase from the prior year.
Life360 launched a new advertising offering in the US in early 2024, now expanding globally. “We continue to expect a noticeable revenue contribution from ads in the second half of 2024, as we build our ad sales, measurement and tech capabilities, and further enable our platform through service integrations like those in place with The Trade Desk, LiveRamp, PubMatic and Google Ad Manager,” said Hulls.
The company also announced expanded partnerships with Arity and Placer.ai to enhance advertising efforts, leveraging technology for crash detection, driving alerts, and personalized car insurance quotes. “Arity will now become more involved as a contributor to our advertising business going forward, both on-site and off-site, which we’re really excited about.” Life360 uses Arity’s technology to enable features like drive detection and crash detection within its app, while allowing Arity to use anonymized location data from the app to generate traffic and transportation insights. These insights are never linked to personally identifiable information. Arity sells these aggregated insights to organizations such as state Departments of Transportation and insurance companies, helping them understand transportation-related trends, like identifying dangerous intersections or road segments.
The CEO emphasized the company’s long-term vision to evolve beyond simple banner ads and become a platform where users are matched with offers tailored to their data. He highlighted the potential of car insurance as a key example, where Life360 could provide real-time insurance quotes based on users’ driving data, building trust by transparently showing how users rank among other drivers. Hulls referenced Credit Karma’s successful model of using sensitive user data, like credit scores, to match users with credit cards, generating significant lead generation revenue. He noted that Credit Karma is now attempting to replicate this model in the car insurance sector through its acquisition of Zendrive , a direction Life360 is also interested in pursuing. “And with a meaningfully smaller user base than us, they were able to generate over $1 billion of lead-gen revenue. And they actually now are trying to replicate that in the car front, not in a competitive way, but they just bought a company called Zendrive to do exactly what we would like to do in the long run with insurers.”
Hulls believes that with a highly engaged audience and proprietary first-party data, Life360 has numerous opportunities, such as offering home security and pet insurance based on user behaviors. He sees these offerings as natural extensions of the company’s core product, which could lead to substantial growth and success.
“You can also imagine like you move to a new home, we can sell you home security or homeowner’s insurance. You get a new pet, you’ll buy our tracker then we’ll sell you a pet insurance policy. There are many of these things that will feel like they’re extensions of our product and that’s when I think we hit the true goldmine.”
Commentary/Opinion
Traveling for Labor Day? Have a back-up plan for cancellations and delays
Labor Day weekend is the last blast of summer vacation, and that means lots of Americans will be traveling.
Many children have gone back to school in the U.S., and the days are getting shorter, but there is still one more excuse to use the swimsuits and beach towels before packing them up: Labor Day.
Airports, highways, beaches and theme parks are expected to be packed for the long holiday weekend as a lot Americans mark the unofficial end of summer the same way they celebrated the season’s unofficial start: by traveling.
The Transportation Security Administration anticipates screening more than 17 million people between Thursday and next Wednesday — a record for the Labor Day period.
AAA says bookings for domestic travel are running 9% higher than last year for the holiday weekend, while international trips are down 4%.
American Airlines plans to have its largest Labor Day weekend operation ever and expects a 14% increase in passengers compared to last year.
Legal System Abuse/Social Inflation
Civil case, nuclear verdict and claims count data show worrying trends...
The P&C industry had another strong quarter, with many carriers reporting year-over-year improvements in underwriting profitability and brokers posting mid-single digit to low-double digit organic growth. However, for all the positive elements of the season, adverse developments in casualty reserves continued to cast a shadow over sentiment.
As we discussed in our Q2 earnings takeaways piece, senior management at Travelers and Selective pointed early on in the reporting season to the challenging social inflationary environment – particularly litigation financing, nuclear verdicts, etc. – as a primary driver of the rising loss costs weighing on casualty lines.
Against this backdrop, we decided to dive deeper into the commentary surrounding social inflation and its impact on the industry at large. We found that many carriers of various sizes across all segments discussed the impact of social inflation on the casualty loss-cost environment.
We also examined civil case counts and data on nuclear verdicts from TransRe to better understand how social inflation has impacted the industry and will continue to do so over time.
Based on our analysis of call commentary and the aforesaid data, we found the following:
The Covid-19 case backlog has still not cleared years after the closures, though the impact may not be uniform across carriers.
Data from TransRe shows the increase in nuclear verdicts seen over the past decade shows no signs of slowing in 2024.
An industry-level claims data analysis paints a mixed picture, but worrisome upward trends arise in a number of lines
RAND Study Eyes Impact of Legal System Abuse and Social Inflation
A study from RAND found that rising litigation rates, trial awards and claim severity are consistent with the expected effects of social inflation.
The study, What Is the Evidence for Social Inflation? Trends in Trial Awards and Insurance Claim Payments, found a 10% increase in the annual number of new court filings per capita between 2012 and 2019 in 19 states, and that 64% of cases reached a verdict in favor of the plaintiff in 2019, up from 53% in 2010.
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Just for Fun
Did Taylor Swift Really Insure Her Legs for US$40 Million? | InsurTech Magazine
We look at the types of insurance afforded to celebrities, their legs and other body parts, which are often insured for staggering amounts
Were Taylor Swift's legs insured for US$40m?
When the rumour mill churned out the sensational claim that Taylor Swift had insured her legs for a staggering US$40 million, it was a story tailor-made for the headlines. The National Enquirer was the first to break the news, and soon, the tale of Swift's supposedly insured limbs spread like wildfire across various media outlets.
The idea of a pop star insuring her legs might seem outlandish to some, but in the world of celebrity, where image is everything, it's not entirely unheard of. After all, stars have been known to take out insurance policies on their most prized assets, from vocal cords to smiles.