General Insurance Article - New analysis validates strength of mutual insurance firms

A comparison of nearly 30 metrics across mutual, stock, and other categories underscores the overall financial strength of mutual insurers

 The National Association of Mutual Insurance Companies and Aon has released the second edition of its annual market performance analysis adding further evidence to support the overall strength and stability of mutual companies.

 The 2019 report, titled The Mutual Factor: How Performance, Structure, and Focus Set Mutual Insurance Companies Apart and developed jointly by NAMIC and Aon, evaluates expanded performance metrics for mutual insurance companies and includes a look at how mutuals are rated under the AM Best Credit Rating Methodology Framework released in 2017. The updated analysis considered a total of 28 different performance metrics for 2019, comparing mutuals, stock companies, and other insurers.

 Neil Alldredge, NAMIC’s senior vice president of corporate affairs notes that the expansion from 16 to 28 performance metrics in the 2019 report lends even greater credence to the underlying structure and focus of the mutual insurance segment.

 “The expanded scope of data analyzed for the 2019 report clearly shows when it comes to operating performance and agency ratings, mutual insurers remain consistently strong,” said Alldredge. “It also validates that the mutual structure, which stresses the alignment of company and policyholder interests, serves both equally well,” he added.

 Chris Delhey, Aon’s mutual insurance practice group leader commented: “Aon is very excited to partner with NAMIC on this important study, which includes a comprehensive analysis of the performance of more than 600 insurers under AM Best’s BCRM framework. It highlights the ongoing financial and operational strength of the mutual insurance sector in the United States, both in their own right and relative to their peers in the wider insurance market.”

 Among the key findings of the 2019 Mutual Factor study were:

 • Mutual insurers were slightly less leveraged than their stock counterparts in 2018, with $1.23 in policyholder surplus backing up each dollar in net premiums written compared to $1.20 for stock insurers.
 • In 2018, the dividend ratio, a gauge of the proportion of premium returned to policyholders, was five times larger for mutuals than for stock companies.
 • Capital and surplus in the mutual segment grew by 1.8 percent in 2018, an improvement in comparison to stock companies which saw surplus growth decline by more than three percent due to higher underwriting costs.
 • Mutual companies are well capitalized with median Best’s Capital Adequacy Ratio (BCAR) at the VaR 99.6 of 59%, 10 points higher than stock companies at 49%. Ninety percent of mutual companies also have the “Strongest” or “Very Strong” balance sheet strength, compared to 78% for stock companies.

 The 2019 Mutual Factor also incorporated a survey of commercial insurance purchasers, building upon the 2018 survey of general insurance consumers. The survey of 553 commercial property/casualty insurance buyers found that 95 percent of respondents to the survey were aware of mutual insurance companies and 65 percent held a favorable view of them. Of those who considered themselves more familiar with mutual insurance companies, that favorability number rose to 87 percent. NAMIC member companies represent nearly 30 percent of the business insurance marketplace.


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