The following is a compilation of the Second Quarter of 2018 for the major insurers in Massachusetts. Only those insurers that are public companies and thus are required to report on a quarterly basis are included in this report.
Chubb had a strong showing in Q2-2018 with its P&C Net Premiums Written increasing 5.6% to $7.55 Billion while its Global P&C Net Premiums rose 6.1% to $7.1 Billion.
Other highlights from Q2 included: Net Premiums Written rising 5.7% to $8.0 Billion, while P&C combined ratio was 88.4% compared with 88.0% prior year. P&C current accident year combined ratio excluding catastrophe losses was 88.1% compared with 87.5% prior year. P&C underwriting income was $824 million, up 2.1%. Adjusted net investment income was $890 million, pre-tax, up 4.0%. • Operating cash flow was $1.6 billion.
In commenting on Q2, Evan G. Greenberg, Chairman and Chief Executive Officer of Chubb Limited, commented:
Chubb’s second quarter after-tax core operating income per share was up over 7% from prior year, driven by excellent underwriting and investment results. Our 88.4% P&C combined ratio benefited from current accident year results and positive prior year reserve releases, while adjusted net investment income was up 4%.
P&C net premiums written increased 5.6% in the quarter, with strong performances in many of our businesses globally such as our U.S. commercial and personal lines divisions and our Asia and Latin America P&C operations, both of which generated double-digit growth. We are benefiting from contributions that are only possible because of the scale and capabilities created by today’s Chubb. This includes a number of growth initiatives, by example, in our North American and international middle market and small commercial divisions, and the level of investment we are making in our digital efforts to improve our competitive profile.
We are taking advantage of market conditions that continue to improve in the U.S. and some territories outside the U.S. with commercial P&C price increases this quarter in those locations the best we’ve seen in some time. We wrote more new business while renewing our customers at record retention levels. In sum,
our organization is running on all cylinders and we’re optimistic about our ability to continue to perform at a high level.”
GEICO writes private passenger automobile insurance, offering coverages to insureds in all 50 states and the District of Columbia. GEICO markets its policies mainly by direct response methods where most customers apply for coverage directly to the company via the Internet or over the telephone.
In the Berkshire Hathway Second Quarterly Report for 2018, the management discussion of GEICO’s first quarter results were described as follows:
- Premiums written in the second quarter and first six months of 2018 were approximately $8.2 billion and $16.9 billion, respectively, representing increases of 13.3% and 13.9%, respectively, compared to 2017.
- These increases reflected voluntary auto policy-in-force growth of 4.9% and increased premiums per auto policy of approximately 8.7% over the past twelve months. The increase in premiums per policy was attributable to rate increases, coverage changes and changes in state and risk mix. The rate increases were in response to accelerating losses in recent years.
- Voluntary auto new business sales in the first six months of 2018 decreased 9.3% compared to our record growth over the first half of 2017, while our voluntary
auto policies-in-force increased approximately 369,000 during the first six months of 2018.
- Losses and loss adjustment expenses increased $397 million (6.5%) in the second quarter and $882 million (7.5%) in the first six months of 2018 compared to 2017. Our ratio of losses and loss adjustment expenses to premiums earned (the “loss ratio”) in the first six months of 2018 was 77.7%, a decline of 5.3 percentage points compared to 2017.
- The decline in the loss ratio reflected the effects of premium rate increases and
comparatively lower storm-related losses.
- We also reduced ultimate claim loss estimates for prior years’ loss events by $430 million in the first six months of 2018 and $106 million in the first six months of 2017. These reductions produced corresponding increases in pre-tax underwriting gains. The comparative increase in gains relating to prior years’ claims was primarily related to collision and property damage losses, which usually have short claim-tails.
- Claims frequencies in the first six months of 2018 for property damage, collision and personal injury protection coverages declined approximately two percent compared to
2017, and decreased approximately three percent for bodily injury coverage. Average claims severities in the first six months of 2018 were higher for property damage and collision coverages (four to six percent range) and bodily injury coverage (five to seven percent range).
- Our underwriting expenses in the first six months of 2018 were approximately $2.3 billion, an increase of $172 million (8.2%) over 2017. Our expense ratio (underwriting expenses to premiums earned) for the first six months of 2018 decreased 0.9 percentage points compared to 2017.
- The largest components of underwriting expenses are employee-related expenses (salaries and benefits) and advertising costs.
- The increase in underwriting expenses reflects the increase in policies-in-force.
“Building on the progress made in the first quarter, net income attributable to Liberty Mutual Holding Company increased to $981 million for the second quarter of 2018,” said David H. Long, Liberty Mutual Chairman and Chief Executive Officer.
“The combined ratio in the quarter was 97.9% as global catastrophes returned to historical levels and core underwriting results improved across many business segments. Favorable partnership, LLC and other equity method investment valuations and an after-tax gain of $464 million related to the sale of Liberty Life Assurance of Boston added to profitability. Growth was robust at 7%.”
Second Quarter Highlights
- Net written premium (“NWP”) for the three months ended June 30, 2018 was $10.071 billion, an increase of $685 million or 7.3% over the same period in 2017.
- Pre-tax operating income (“PTOI”) before partnerships, limited liability companies (“LLC”) and other equity method income for the three months ended June 30, 2018 was $471 million, an increase of $452 million over the same period in 2017.
- Partnerships, LLC and other equity method income for the three months ended June 30, 2018 was $291 million, an increase of $185 million or 174.5% over the same period in 2017.
- Net realized (losses) gains for the three months ended June 30, 2018 were ($59) million versus $18 million for the same period in 2017.
- Ironshore Inc. (“Ironshore”) acquisition and integration costs for the three months ended June 30, 2018 were $10 million, a decrease of $16 million or 61.5% from the same period in 2017.
- Restructuring costs for the three months ended June 30, 2018 were $28 million versus zero for the same period in 2017.
- Loss on extinguishment of debt for the three months ended June 30, 2018 was $3 million versus zero for the same period in 2017.
- Discontinued operations, net of tax, for the three months ended June 30, 2018 were $471 million, an increase of $419 million over the same period in 2017.
- Consolidated net income for the three months ended June 30, 2018 was $980 million, an increase of $853 millionover the same period in 2017.
- Net loss attributable to non-controlling interest for the three months ended June 30, 2018 was $1 million versus net income attributable to non-controlling interest of $1 million for the same period in 2017.
- Net income attributable to LMHC for the three months ended June 30, 2018 was $981 million, an increase of $855 million over the same period in 2017.
- Cash flow provided by continuing operations for the three months ended June 30, 2018 was $1.120 billion, an increase of $136 million or 13.8% over the same period in 2017.
- The consolidated combined ratio before catastrophes, net incurred losses attributable to prior years and current accident year re-estimation for the three months ended June 30, 2018 was 92.3%, a decrease of 1.3 points from the same period in 2017. Including the impact of catastrophes, net incurred losses attributable to prior years and current accident year re-estimation, the total combined ratio for the three months ended June 30, 2018 was 97.9%, a decrease of 4.9 points from the same period in 2017.
At the beginning of 2018, MAPFRE announced a major restructuring with respect to its North American business, which will see split the North American business in two: Massachusetts, its home state and the rest of the U.S. With that said, the following excerpt which focuses on MAPFRE’s latest quarterly results with respect to its North American Region:
Business volume in the North America Regional Area was more than 1.2 billion euros (-7.4 percent), as a result of the depreciation of the U.S. dollar (-9 percent) and the cancellation of unprofitable businesses in the United States, where premiums amounted to more than 1 billion euros at the end of June (-10.8 percent). It is important to highlight the impact of the storms on the East coast on U.S. first quarter results, which entailed a net cost of 12 million euros. In the Northeast region (which includes Massachusetts and four neighboring states), premiums were up 2.3 percent in local currency, with the downward trend continuing in the rest of the states as a result of the cancellation of unprofitable business. MAPFRE is advancing in the reorganization its business activity in the United States, with the sale of the Life insurance operation and withdrawal from five states, implying a cost of 7.2 million euros.”
“MetLife delivered a very strong second quarter driven by solid underwriting and expense management around the globe,” said Steven A. Kandarian, chairman, president and CEO of MetLife, Inc.
“During the quarter we divested our remaining stake in Brighthouse and returned approximately $1.5 billion to shareholders through common stock repurchases and dividends. We remain focused on improving our return on equity, maintaining strong free cash flow, meeting our expense targets, and distributing capital to shareholders.”
Second Quarter Results Summary
- Net income of $845 million, compared to net income of $865 million in the second quarter of 2017. On a per share basis, net income of $0.83, compared to net income of $0.80 in the prior-year period.
- Adjusted earnings* of $1.3 billion, or $1.30 per share, compared to adjusted earnings of $1.1 billion, or $1.04 per share in the second quarter of 2017.
- Book value of $50.28 per share, down 21 percent from $63.63 per share at June 30, 2017, primarily due to the separation of Brighthouse Financial, Inc. and its subsidiaries (Brighthouse).
- Book value, excluding accumulated other comprehensive income (AOCI) other than foreign currency translation adjustments (FCTA)*, of $42.76 per share, down 17 percent from $51.29 per share at June 30, 2017, also primarily due to the separation of Brighthouse.
- Return on Equity (ROE) of 6.5 percent.
- Adjusted ROE, excluding AOCI other than FCTA*, of 12.2 percent.
In her June letter to shareholders, Progressive CEO Tricia Griffith commented on the results of Q2 saying,
“As we wrap up the first half of the year, we continue to be pleased with our results. Our year-to-date (YTD) combined ratio (CR) is a solid 89.7 with approximately 21% growth in net premiums written. Consistent strong new application growth, frequency trends, and retention all play a part in these robust numbers…
Here is an overview of Progressive’s number as of June 30, 2018
Net income for the quarter ended June 30, 2018 was $26.8 million, or $1.75 per diluted share, $5.7 million more than the same time last year. Net income also increased to $35.9 million, or $2.35 per diluted share, compared to net income of $33.1 million, or $2.18 per diluted share, for the comparable 2017 period.
Other significant factors Safety reported this quarter included:
- Direct written premiums increased by $6.0 million, or 2.6%, to $233.0 million.
- Direct written premiums for Q2 increased by $10.1 million, or 2.4%, to $436.8 million from $426.7 million for the comparable 2017 period.
- The 2018 increase occurred primarily in our commercial automobile and homeowners lines of business.
- Net written premiums for Q2 also increased by $1.7 million, or 0.8%, to $215.5 million from $213.8 million and by $0.8 million, or 0.2% for the first half of 2018, to $405.5 million from $404.7 million for the comparable 2017 period.
- Net earned premiums for the quarter ended June 30, 2018 increased by $1.3 million, or 0.7%, to $194.1 million from $192.8 million for the comparable 2017 period. Net earned premiums for the six months ended June 30, 2018 increased by $3.6 million, or 0.9%, to $386.1 million from $382.5 million for the comparable 2017 period. Net written and net earned premiums increased primarily due to increases in our commercial automobile and homeowners business as discussed above.
- Loss and loss adjustment expenses incurred decreased by $3.8 million, or 3.3%, to $113.2 million from $117.0 million for the comparable 2017 period. For the six months ended June 30, 2018, loss and loss adjustment expenses incurred increased by $5.4 million, or 2.2%, to $250.9 million from $245.5 million for the comparable 2017 period.
The Hanover Insurance Group
“We are pleased with our second quarter performance,” said John C. Roche, president and chief executive officer at The Hanover. “We continued to demonstrate the value of our company’s agency-centered strategy and distinctive business model, generating an operating return on average equity of approximately 13 percent(4) and overall growth of 7 percent, notably, in our most profitable businesses.
“While market conditions continue to be very dynamic, we remain satisfied with the overall domestic pricing environment,” Roche said. “Our Core Commercial pricing ticked up in the quarter, while Personal Lines rate increases remained relatively stable. We are confident that our dedicated teams, enhanced capabilities and strong agency franchise approach will allow us to continue growing profitably in target sectors.”
Net income for Q2-2018 was $99.3 million, or $2.31 per diluted share, compared to $78.4 million, or $1.83 per diluted share, in the prior-year quarter. Operating income(1) was $94.6 million, or $2.20 per diluted share.
More Second Quarter Highlights
- Combined ratio, excluding catastrophes, of 90.5%, an improvement of 0.3 points over the prior-year quarter
- Catastrophe losses of $63.6 million, or 5.0 points of the combined ratio, driven primarily by wind and hail events in the Northeast and Midwest, largely in Personal Lines
- Net premiums written increased 6.9%, with strong growth in more profitable Personal Lines, Small Commercial and target Specialty businesses
- Continued price increases in Commercial and Personal Lines
- Net investment income of $78.7 million, up 8.9% from the prior-year quarter, aided by higher cashflows from operations and growth in partnership income
- Book value per share of $69.17, up 0.9% from March 31, 2018, primarily due to earnings accretion, partially offset by changes in fair value of the fixed income portfolio due to interest rate movements and widening of credit spreads
- Repurchased approximately 99,000 shares of common stock for $11.7 million during the second quarter of 2018
“For the quarter, we delivered solid operating earnings of $2.20 per share,” said Jeffrey M. Farber, executive vice president and chief financial officer. “All of our financial measures remain in line with our expectations. Our current year underlying loss trends remained stable, the expense ratio improved by half-a-point in our domestic business, while retention and new business quality remained strong. We continue to build momentum across the organization, and we are well positioned to capitalize on this momentum in the second half of 2018.”
“Consistent execution and sharp focus on achieving our strategic and financial goals led to another strong quarter for The Hartford,” said The Hartford’s Chairman and CEO Christopher Swift.
“Higher income before income taxes from Commercial Lines, Group Benefits and Mutual Funds, as well as the benefit of a lower U.S. corporate tax rate, drove core earnings per diluted share of $1.13 up 40% from last year, while book value per diluted share, excluding AOCI, rose 8% since Dec. 31, 2017. Looking across all the businesses, I am very pleased with our financial performance and our progress on strategic product, distribution and technology initiatives, and the Group Benefits integration that continues to go very well and remains on schedule. Supported by our improved financial flexibility and financial results, we announced a 20% increase in our common dividend last week.”
The Hartford’s President Doug Elliot said, “P&C and Group Benefits results reflect our disciplined approach to pricing and underwriting in markets that remain competitive. I’m pleased with our pricing progress across Commercial Lines, with a 70 basis point sequential quarter increase in renewal written pricing. While catastrophe losses were higher this quarter than a year ago, P&C net income increased 27% over second quarter 2017, including improved underlying margins in both Commercial Lines and Personal Lines. Group Benefits net income grew 39%, including the benefit of the acquisition, higher sales and strong persistency, as well as lower loss and expense ratios and tax rates.”
Second Quarter Highlights include:
- Income from continuing operations, after tax, totaled $434 million compared with a second quarter 2017 loss from continuing operations, after tax, of $152 million ($0.42 per diluted share), which included a $488 million, after tax, pension settlement charge
- Core earnings* were $412 million, up 36% from $303 million ($0.81 per diluted share), in second quarter 2017 due to higher income before income taxes in the Commercial Lines, Group Benefits and Mutual Funds segments and the favorable impact of a lower U.S. corporate tax rate
- Property and casualty (P&C) combined ratio of 95.7 decreased 1.4 points from second quarter 2017 due to higher favorable prior accident year development (PYD) and a better underlying combined ratio*, partially offset by higher current accident year catastrophe losses; P&C underlying combined ratio of 90.3 improved 1.3 points from second quarter 2017, reflecting better results in Commercial Lines and Personal Lines
- Group Benefits net income of $96 million rose 39% from second quarter 2017 primarily due to the fourth quarter 2017 acquisition, an improved disability loss ratio, and the favorable impact of a lower U.S. corporate tax rate
- Book value per diluted share of $34.44 declined 7% from Dec. 31, 2017, due to lower net unrealized capital gains from higher interest rates and wider credit spreads and the sale of Talcott Resolution; book value per diluted share (excluding accumulated other comprehensive income (AOCI))* was $38.15, up 8%
“Second quarter core income was $494 million, down from $543 million in the prior year quarter, due to a $122 million after-tax increase in catastrophe losses resulting from an active tornado and hail season,” said Alan Schnitzer, Chairman and Chief Executive Officer.
“Results excluding catastrophe losses were strong, reflecting record net earned premiums and a consolidated underlying combined ratio of 93.6%, with each of our business segments contributing. The underlying combined ratio in Business Insurance was a solid 96.5%. The underlying combined ratio in our Bond & Specialty Insurance business was strong at 80.5%. The underlying combined ratio in Personal Insurance improved to 92.6%, reflecting a 6.9 point improvement in Agency Auto as a result of our actions in recent quarters to increase profitability. The consolidated expense ratio improved by 0.4 points from disciplined top line growth and expense management, along with the successful execution of our productivity initiatives. Our investment portfolio continued to perform well, with income from our fixed income portfolio continuing to increase. Our capital management strategy remains unchanged, and we returned approximately $560 million of excess capital to our shareholders this quarter, including $350 million of share repurchases, bringing the year-to-date total to over $1.15 billion.
“We are pleased with the execution of our marketplace strategies. Net written premiums increased by 7% to a record $7.1 billion. Net written premiums in Business Insurance increased by 7%. This was driven by very strong execution by our domestic field organization,
which resulted in renewal premium change that reached 5.3%, its highest level since 2014, while still achieving retention of 85%, consistent with historical highs. The recent establishment of business centers in our Commercial Accounts business contributed to an
8% increase in domestic new business in Business Insurance. In Bond & Specialty Insurance, net written premiums increased by 9%, with strong production across our Management Liability and Surety businesses. In Personal Insurance, net written premiums increased
by 8%, benefiting from renewal premium change of 9% in Agency Auto and continued growth in Agency Homeowners.
“Turning to weather more broadly, absent a severe hurricane season, we expect catastrophe losses to be highest in the second quarter. Catastrophe losses were $488 million this quarter, approximately $50 million more than we would have expected, but within the range of normal variability. This follows several recent quarters in which catastrophe losses exceeded our historical experience and expectations. Weather is inherently unpredictable, and accordingly, we take a balanced approach to developing conclusions from whathappens in a relatively short period of time. As always, the impact of weather on our business has our full attention, and we will continue to use our leading actuarial expertise and the latest in weather modeling to inform our underwriting and pricing decisions.
“With a strong foundation, an active innovation agenda, superior talent and a track record of successfully managing our businesses for the long term, we remain well positioned to continue to deliver leading returns over time.”
- Second Quarter Return on Equity of 9.2% and Core Return on Equity of 8.7%
- Second quarter net income of $524 million and core income of $494 million.
- Catastrophe losses of $488 million pre-tax increased by $85 million pre-tax from the prior year quarter. Quarter-over-quarter results also impacted by an incremental charge of $45 million pre-tax associated with a few large commercial losses, primarily
- Consolidated combined ratio of 98.1%; underlying combined ratio of 93.6%.
- Record net written premiums of $7.131 billion, up 7% from the prior year quarter, reflecting growth in all segments.
- Renewal premium change in Business Insurance at highest level since 2014.
- Total capital returned to shareholders of $559 million in the quarter, including $350 million of share repurchases. Year-to-date
total capital returned to shareholders of $1.157 billion, including $751 million of share repurchases.
- Book value per share of $84.51, down 3% from year-end 2017, due to the impact of higher interest rates on net unrealized
investment gains/(losses). Adjusted book value per share of $84.93, up 2% from year-end 2017.
- Board of Directors declared quarterly dividend per share of $0.77.