A look At The Q1-2020 Earning Results of Select Insurers
While it is still too early to tell how far-reaching the effects of the COVID-19 Pandemic will be on the insurance industry in 2020, some insurers have begun to see the effects of a downturn earlier than others. For example, in a May 5th article in the Wall Street Journal, the newspaper reviewed the first quarter results of global insurers AIG, Prudential, and Allstate, noting the “mixed-bag” of results. For example, it noted that AIG “posted a 91% decline in its widely watched ‘adjusted pretax income’ to $172 million from $1.85 billion in the year-earlier quarter” while Allstate’s net income adjusted net income reportedly rose 4% during the same time period to $1.14 billion.
Continuing the trend, other insurers, however, have shown a wide variety of results for Q1-2020. In order to get a sense of the uneveness, the following is a recap of selected First Quarter Earning Results. The insurers listed in this re-cap were based upon whether or not they do a large amount of business in Massachusetts, and whether or not they file quarterly reports. The only exception is Vermont Mutual, which is reporting on its annual results announced during its 193rd annual meeting held in April.
Please note these are mainly excerpted segments taken directly from various company earning announcements and reprinted below:
MAPFRE Earns 127 Million Euros To March (-32 %); Revenues Exceed 7.33 Billion Euros (-4.7)
For Massachusetts’s largest auto and homeowners insurer, the impact of COVID-19 on the global insurer was limited in the First Quarter of 2020. The earnings as stated in Euros can be adjusted to dollars at the rate of 1€ to $1.08, as of the present exchange rate.
MAPFRE’s North American Results
As it stands in Q1-2020, revenues stood at 7.33 billion euros, 4.5 percent less than between January and March 2019, and premiums fell by 4.7 percent to 6.1 billion euros. Looking at its North American results, premiums exceeded 510 million euros (-7.3 percent) at the close of March. Earnings, which include a net capital gain of 14 million from the sale of a building in Boston, were up by 79 % to 24 million euros, despite the negative impact of the earthquake in Puerto Rico.
Q1-2020 Report Highlights:
- Premiums totalled almost 6.1 billion euros (-4.7 percent).
- The Iberia regional area (Spain and Portugal) remains the driver of the Group’s growth, outperforming the sector in Spain.
- Improved insurance result in the Group’s principal regions.
- Earnings at the insurance unit, MAPFRE’s core business, grow by 10 percent, to 197 million euros.
- The Puerto Rico earthquake and Storm Gloria in Spain result in an impact of 68 million euros.
- The Group’s financial flexibility, solvency and liquidity remain hallmarks of MAPFRE’s resilience in the current situation.
- A decision regarding the 2020 interim dividend will be taken in the second half of the year.
MAPFRE’s net earnings for the first three months of this year were 127 million euros, 32 percent lower than in the same period of the previous year. According to the insurer, the results were affected by both the earthquake in Puerto Rico which occurred at the beginning of the fiscal year, as well as the effects of Storm Gloria in Spain, with an impact of 14 million euros. The global insurer also noted the negative impact that emerging-country currencies had, cutting more than 6 million from its net result. Excluding the impact of these catastrophic events, the company says that its adjusted result would have been 190 million euros, with growth of more than 3 percent.
Safety Says COVID-19 Caused No Material Effect On Premium Revenues In Q1-2020; Declares Q2-2020 Dividend
“COVID-19 did not have a material effect on our premium revenues for the first quarter of 2020. Early in the second quarter of 2020, the Company announced the Safety Personal Auto Relief Credit, a 15% policyholder credit applied to each personal auto policy for the months of April and May. Although the pandemic has resulted in fewer cars on the road, there was not a material impact to loss and loss adjustment expenses incurred during the three months ended March 31, 2020.”
Q1-2020 Report Highlights:
- Net loss for the quarter ended March 31, 2020 was $2.0 million, or $0.13 per diluted share.
- Safety’s book value per share decreased to $49.78 at March 31, 2020 from $52.55 at December 31, 2019.
- Direct written premiums for the quarter ended March 31, 2020 decreased by $6.1 million, or 3.0%, to $197.3 million from $203.4 million for the comparable 2019 period. The decrease is primarily in our commercial automobile line of business and is a result of changes made by Commonwealth Automobile Reinsurers (“CAR”) to eligibility requirements which impacted the number of policies that we handle as a Servicing Carrier to the ceded pool. This resulted in a commensurate decrease in ceded written premium to and assumed from these programs.
- Net written premiums for the quarter ended March 31, 2020 decreased by $1.0 million, or 0.5%, to $188.9 million.
- Net earned premiums for the quarter ended March 31, 2020 increased by $3.3 million, or 1.8%, to $197.8 million.
- For the quarter ended March 31, 2020, loss and loss adjustment expenses incurred decreased by $5.3 million, or 4.2%, to $120.7 million from $126.0 million for the comparable 2019 period. The decrease is primarily due to favorable winter weather-related activity in 2020.
- Loss, expense, and combined ratios for the quarter ended March 31, 2020 were 61.0%, 31.9%, and 92.9%, respectively, compared to 64.8%, 31.1%, and 95.9%, respectively, for the comparable 2019 period.
- Net investment income for the quarter ended March 31, 2020 decreased by $1.1 million, or 8.9%, to $10.7 million.
- On March 17, 2020, the Company borrowed $30.0 million from the FHLB-Boston out of an abundance of caution due to market uncertainty caused by COVID-19. The cash is still held on March 31, 2020 and is presented as an offset to the Other Liabilities financial statement line-item, which represents outstanding claim checks.
The Board of Directors approved and declared a $0.90 per share quarterly cash dividend on its issued and outstanding common stock, payable on June 15, 2020 to shareholders of record at the close of business on June 1, 2020.
Hanover CEO – “I have confidence the industry will respond and perform where contractual business interruption insurance exists, but that the sanctity of the contract will prevail in policies where coverage is excluded.”
The Hanover reported a net loss of $40.0 million in the first quarter of 2020. Operating income, however, was $86.8 million up from $80.7 million in the prior-year quarter. According to the Worcester-based insurer, the difference between the net loss and operating income was primarily due to an after-tax decrease in the fair value of equity securities of $107.6 million, or $2.81 per basic share, and after-tax impairment losses on investments of $22.5 million, or $0.59 per basic share, both of which follow the dramatic downturn in the financial markets in March and are excluded from operating income.
“In these unprecedented times defined by the COVID-19 global pandemic, our thoughts are with our employees, partners, customers, shareholders, and our communities,” said John C. Roche, president, and chief executive officer at The Hanover. “I am incredibly proud of our outstanding team of 4,300 employees, which has demonstrated tremendous resiliency and flexibility during this uncertain time. We seamlessly transitioned to a remote work environment, while continuing to provide the highest quality service. I am equally proud of our robust and compassionate response to support all of our stakeholders, through our extensive customer relief program, financial and operational support to our agents and customers, and commitments to local communities, including multiple charitable donations.
Select comments on Q1-2020:
From a financial perspective, our company remains very strong, as demonstrated by our strong results in the quarter. Our insurance book of business is built on thoughtful and conservative underwriting practices, a diversified, carefully constructed product portfolio, and broad-based profitability. We believe these elements, combined with our solid balance sheet and ample liquidity, will allow us to successfully manage through the impacts of COVID-19 while continuing to deliver superior industry results. I have confidence the industry will respond and perform where contractual business interruption insurance exists, but that the sanctity of the contract will prevail in policies where coverage is excluded.”
Q1-2020 Report Highlights:
- Operating income of $2.23 per diluted share, up 13.8% from the prior-year quarter
- First-quarter combined ratio of 95.2%, improved from 95.8% in the first quarter 2019; combined ratio, excluding catastrophes(2) of 91.9%, improved from 92.2%
- Price increases of 5.9% in Core Commercial Lines and 5.1% in Personal Lines
- Personal Lines operating income before taxes was $64.9 million in the quarter, compared to $26.8 million in the first quarter of 2019. The Personal Lines combined ratio was 90.0%, compared to 98.2% in the prior-year quarter. Catastrophe losses in the first quarter of 2020 were $14.1 million, or 3.0 points, compared to $29.0 million, or 6.6 points, in the prior-year quarter.
- Commercial Lines operating income before taxes was $54.6 million in the quarter, compared to $80.2 million in the first quarter of 2019. The Commercial Lines combined ratio was 98.2%, compared to 94.2% in the prior-year quarter. Catastrophe losses in the first quarter of 2020 were $23.8 million, or 3.5 points, compared to $10.4 million, or 1.6 points, in the prior-year quarter. Catastrophe losses in the prior-year quarter were reduced by the sale of subrogation rights related to certain 2017 and 2018 California wildfire losses.
- Current accident year loss and loss adjustment expense (“LAE”) ratio, excluding catastrophes, was impacted by favorability in personal auto from benign weather and lower miles driven, offset by elevated property loss experience and COVID-19-related reserves in Commercial Lines
- Net premiums written increase of 3.5%** primarily reflected growth in most profitable businesses
- Net investment income of $69.6 million, down 0.9% from the prior-year quarter
- Completion of the previously announced $150 million accelerated share repurchase (“ASR”) agreement, repurchasing approximately 1.1 million shares of common stock, as well as the subsequent repurchase of approximately 350,000 shares of common stock in the open market
- Book value per share of $72.05, down 5.1% from December 31, 2019, driven primarily by the after-tax decrease in the fair value of fixed income and equity securities, partially offset by net operating income
Liberty CEO – “We are confident in the strength and resiliency of our operations to allow us to endure these uncertain times and continue to serve our customers.”
“As we face this unprecedented time, our heartfelt thanks go out to healthcare and other essential workers and we extend our deepest sympathies to those most impacted by the pandemic,” said Liberty Mutual Chairman and Chief Executive Officer, David Long. “Our top priority as a company has been the health and well-being of our employees, customers, partners, and the communities where we live and work. As such, we have mobilized virtually all our employees to work from home, while continuing to provide top-tier service to our customers and have announced premium refund programs for our personal auto and small commercial policyholders to provide some relief in these difficult times.
Select comments on Q1-2020:
“While the pandemic is still evolving, from a financial perspective we expect the impact of COVID-19 on our insurance operations to be similar to those we have experienced for a moderately sized catastrophe loss. The areas of our business most exposed to insurance losses related to the pandemic and resulting
economic downturn include trade credit, general liability, workers compensation, and event cancellation coverage, among others.
“We anticipate the larger impact from COVID-19 will come through our investment portfolio, where we have taken realized and unrealized losses caused by the recent market downturn. We expect our net investment income will be dampened in the coming quarters as well by lower valuations on our private equity investments, which are reported on a quarter lag and thus not recognized in our first-quarter results. Our liquidity position remains excellent, with access to over $6 billion in total, not including current cash on hand of $1.4 billion. We are confident in the strength and resiliency of our operations to allow us to endure these uncertain times and continue to serve our customers.”
Q1-2020 Report Estimated Highlights:
- Net written premium of approximately $10 billion: Our first quarter net written premium was not materially impacted by COVID-19, however we do expect COVID-19 and the related economic downturn to dampen net written premium growth in future quarters.
- Combined ratio of approximately 97%: While losses from COVID-19 had a marginal impact on the combined ratio in the quarter, we expect a more meaningful impact in the second and third quarters as the situation evolves and we continue to assess our potential exposure.
- Total equity of approximately $23 billion: This would be down approximately 2% from December 31, 2019. The decline in equity is primarily driven by unrealized investment losses, as a result of the market fallout stemming from COVID-19.
Liberty Mutual says its officer Q1-2020 financial results will be issued on May 14th and will update this provisional report.
Traveler CEO – “In Personal Insurance, net written premiums increased by 8%, with Agency Homeowners up 18% and Agency Auto up 3%, with both lines benefiting from strong production.”
“The events of the last few months have been challenging, and our hearts go out to all those affected by the COVID-19 global pandemic,” said Alan Schnitzer, Chairman and Chief Executive Officer. “We appreciate the thoughtful actions taken by our government leaders, at all levels, to support individuals and businesses. In addition, we would like to extend our deep gratitude for the heroic efforts of healthcare workers and first responders, as well as the contributions from food, delivery and all other essential workers…
Select comments on Q1-2020:
“Turning to our financial results for the first quarter, core income was $676 million, and core return on equity was 11.5%. Underlying underwriting income in the quarter was higher than in the prior year period, benefiting from record first quarter net earned premium of $7.2 billion and an underlying combined ratio which improved to 91.3%. These strong underlying results, which included the impact of charges related to the COVID-19 pandemic, were more than offset by higher catastrophe losses. Our high-quality investment portfolio generated net investment income of $519 million after-tax. These results, along with our strong balance sheet, enabled us to return $681 million of excess capital to our shareholders this quarter, including $471 million of share repurchases.
“We grew net written premiums by 4% in the quarter to more than $7.3 billion, with all segments contributing. In Business Insurance, renewal premium change was 7.8%, including renewal rate change of 6.2%, while retention remained very strong. In Bond & Specialty Insurance, net written premiums increased by 13%, reflecting strong production across our Management Liability and Surety businesses. In Personal Insurance, net written premiums increased by 8%, with Agency Homeowners up 18% and Agency Auto up 3%, with both lines benefiting from strong production…”
Q1-2020 Report Highlights:
- First-quarter net income of $600 million and core income of $676 million.
- Catastrophe losses of $333 million pre-tax compared to $193 million pre-tax in the prior-year quarter.
- COVID-19-related net charges of $86 million pre-tax ($68 million after-tax) included in underwriting gain.
- Consolidated combined ratio of 95.5%; underlying combined ratio of 91.3%.
- Net written premiums of $7.346 billion, up 4%; reflecting growth in all segments.
- Total capital returned to shareholders of $681 million, including $471 million of share repurchases.
- Book value per share of $99.69; adjusted book value per share of $92.63.
- Board of Directors declares regular quarterly cash dividend of $0.85 per share, an increase of 4%.
Travelers will be holding a Virtual-Only Annual Meeting on May 21, 2020, at 9 a.m. EDT. Shareholders of record of the company’s common stock at the close of business on March 24, 2020, are invited to participate in the Annual Meeting and can access the audio webcast at www.virtualshareholdermeeting.com/TRV2020.
The Hartford CEO – “The global pandemic has changed the immediate circumstances, but we have an unwavering commitment to our people, customers, partners, and communities.”
“The COVID-19 pandemic has forced unprecedented change in all aspects of society and the global economy. My thoughts and prayers are with those suffering the effects of the virus. I extend my deepest gratitude to the health care workers and those on the front line courageously and selflessly fighting this pandemic,” said Christopher Swift, Chairman, and CEO.
“We entered 2020 in a position of strength, focused on execution to build on the momentum in our businesses. In the first quarter, we generated an industry-leading twelve-month ROE on core earnings of 13.3 percent. At The Hartford we live our purpose; we underwrite Human Achievement. The global pandemic has changed the immediate circumstances, but we have an unwavering commitment to our people, customers, partners, and communities. With the combination of our purpose, talented and dedicated employees, and a strategy for future success, I am confident we will manage through this difficult time and continue to thrive.”
Select comments on Q1-2020:
Doug Elliot, President of The Hartford further commented, “As Chris stated, this crisis has challenged all aspects of daily life with wide-ranging impacts to our stakeholders. We have adjusted operational policies to help agents and customers adapt to the financial effects of this pandemic and I have been inspired by our employees and their dedication during these difficult times. In the quarter, pricing momentum in middle market remained strong. Excluding workers’ compensation, standard commercial rate increases in this line were 9.4 percent and accelerated during the quarter. In Global Specialty, the underwriting actions we took to improve profitability coupled with rigorous execution on renewal pricing, drove the improvement in our underwriting margins. As the next few months unfold we will continue to help our customers prevail, while maintaining a culture of underwriting and pricing discipline for the long-run.”
Q1-2020 Report Highlights:
- First quarter 2020 net income available to common stockholders of $268 million ($0.74 per diluted share) decreased 57% from first quarter 2019, and core earnings* of $485 million (core earnings per diluted share* of $1.34) declined 4% from first quarter 2019
- Net income ROE for the trailing 12-month period ended March 31, 2020, was 11.8% and core earnings ROE* for the same period was 13.3%
- Book value per diluted share was $41.42, down 6% from December 31, 2019; book value per diluted share excluding accumulated other comprehensive income (AOCI)* rose 1% to $44.07
- In the first quarter, The Hartford returned $258 million to shareholders, consisting of $108 million in common stockholder dividends paid and $150 million of common share repurchases. The Company has $650 million remaining under its $1.0 billion share repurchase authorization. The Company paused share repurchase activity as it continues to monitor the evolving impacts of COVID-19
- The impact to The Hartford’s underwriting operations from COVID-19 was approximately $50 million, before tax. The Company continues to monitor the effects of COVID-19 and will work closely with our impacted customers
Chubb CEO – “We should prevent self-inflicted harm from government attempts to force insurers to retroactively pay uncovered business interruption claims, which is simply unconstitutional.”
“Insurance has an important role to play in society and in the economy, and at Chubb we are doing our job to support our customers, employees and business partners, all of whom rely on us. We are operating day-to-day at a very high level globally and I am confident Chubb will weather this difficult time and emerge stronger.
“As the U.S. gains better control over the virus and we look forward to reopening the economy, the ability to test, digitally trace and isolate is fundamental to suppressing the spread of the virus while returning to more normal economic and social activity. It is also important at this time that we do not add unnecessarily to the great uncertainty we are already experiencing. To that end, we should prevent self-inflicted harm from government attempts to force insurers to retroactively pay uncovered business interruption claims, which is simply unconstitutional.”
Select comments on Q1-2020:
“Chubb had a very good first quarter that demonstrated the underlying health and strength of our company as we entered this period of the COVID-19 global pandemic. Core operating income per share of $2.68 was up 5.5% from prior year, and our underwriting results were highlighted by a P&C combined ratio of 89.1%. We grew P&C premiums globally 9.3% in constant dollars as we continued to benefit from improved rate to exposure, particularly in our commercial P&C business – a positive and necessary trend that continued into April,” commented Evan G. Greenberg, Chairman and Chief Executive Officer of Chubb Limited in the company’s official Q1-2020 announcement.
“The coronavirus is delivering a severe blow to the global economy. How long and how deep is unknown. It will have a major impact on the global insurance industry in terms of both losses and revenue. For Chubb, we expect our premium growth momentum to be impacted for a period as insurance exposures in important areas shrink. This will be an earnings event for our company; our balance sheet and liquidity remain strong.
Q1-2020 Report Highlights:
- Net income was $252 million versus $1,040 million prior year, and core operating income was $1,220 million versus $1,170 million prior year. The quarter was marked by financial market volatility in the credit, equity and foreign exchange markets, which impacted net income.
- P&C net premiums written were $7.3 billion, up 8.9%, or 9.3% in constant dollars.
- P&C underwriting income was $778 million, up 9.3%, leading to a P&C combined ratio of 89.1% compared with 89.2% prior year, and a P&C current accident year combined ratio excluding catastrophe losses of 87.5% compared with 88.5% prior year.
- Global P&C underwriting income, which excludes Agriculture, was $764 million, up 19.5%, leading to a Global P&C combined ratio of 89.2% compared with 90.2% prior year, and a current accident year combined ratio excluding catastrophe losses of 87.4% compared with 88.6% prior year.
- Pre-tax net investment income was $861 million, up 3.1%, and adjusted net investment income was $893 million, up 1.3%.
- Book and tangible book value per share decreased 5.5% and 7.5%, respectively, for the quarter, due to the mark-to-market impact from financial market volatility in the company’s investment and variable annuity reinsurance portfolios and from unfavorable foreign currency movement. The company believes this market price-driven impact will in all likelihood be largely transient. As of Monday, April 20, 2020, the mark had substantially recovered.
- Pre-tax catastrophe losses were $237 million in the quarter, including $224 million from global weather-related events and $13 million related to the COVID-19 global pandemic, which will be tracked as a separate ongoing catastrophe event.
- While there was no significant impact on core operating income in the first quarter relating to the COVID-19 global pandemic, the company anticipates that this global catastrophe event will have a meaningful impact on revenue as well as net and core operating income in the second quarter and potentially future quarters as a result of an increase in insurance claims due to both the pandemic and recessionary economic conditions.
MetLife CEO – “By continuing to execute on our Next Horizon strategy, we’re confident we will position MetLife for long-term success.”
“Our commitment to being a purpose-driven company is even more important in the face of this pandemic. For our employees, we’ve introduced a variety of programs to protect their wellbeing. For our customers, we’re showing flexibility and compassion to help them navigate this challenge. And for our communities, we’re providing significantly increased support,” said MetLife President and CEO Michel Khalaf.
Select comments on Q1-2020:
“In the first quarter, MetLife delivered solid results that affirm our underlying financial strength. We entered this period of uncertainty with a business that is less capital intensive, an investment portfolio that is well-positioned for a downturn, and a commitment to expense discipline that is stronger than ever. By continuing to execute on our Next Horizon strategy, we’re confident we will position MetLife for long-term success.”
Q1-2020 Report Highlights:
- Net income of $4.4 billion, or $4.75 per share, compared to net income of $1.3 billion, or $1.40 per share in the first quarter of 2019.
- Adjusted earnings of $1.4 billion, or $1.58 per share, compared to adjusted earnings of $1.4 billion, or $1.48 per share in the first quarter 2019.
- Adjusted earnings, excluding total notable items, of $1.4 billion, or $1.58 per share compared to adjusted earnings, excluding total notable items, of $1.5 billion, or $1.54 per share in the first quarter 2019.
- Book value of $72.62 per share, up 25 percent from $58.06 per share at March 31, 2019.
- Book value, excluding accumulated other comprehensive income (AOCI) other than foreign currency translation adjustments (FCTA), of $52.36 per share, up 15 percent from $45.58 per share at March 31, 2019.
- Return on equity (ROE) of 27.1 percent.
- Adjusted ROE, excluding AOCI other than FCTA, of 12.6 percent
Allstate CEO – ““We led the industry in helping customers, including providing a Shelter-in-Place Payback of over $600 million since they are driving less due to social distancing requirements.”
“Allstate’s proactive risk and return management served customers and shareholders exceptionally well as the coronavirus pandemic hit our shores. After 89 years in the catastrophe business, we know success is determined by acting decisively, quickly and putting people first,” said Tom Wilson, Chair, President and CEO of The Allstate
Corporation. “We led the industry in helping customers, including providing a Shelter-in-Place Payback of over $600 million since they are driving less due to social distancing requirements. Our employees and agents reacted quickly, with over 95% working from home to serve customers. Allstate Identity Protection is also providing free identity protection to any U.S. resident for the rest of the year. Public equity holdings were reduced in February by $4 billion as we adjusted our risk and return profile, which lowered the negative impact of the March equity market decline.”
Select comments on Q1-2020:
“Operating and financial results were also strong with more policies in force and excellent returns for shareholders. Revenues were $10.1 billion and Property-Liability insurance premiums earned increased 4.4% over the prior year. Net income was $513 million in the quarter, and adjusted net income* was $1.14 billion, or $3.54 per common share, which was 53.9% higher than last year, reflecting lower catastrophe losses. Adjusted net income return on equity* was 18.2% for the last 12 months. Shareholders also benefited by receiving $670 million of cash through common share repurchases and dividends in the quarter. Allstate’s role in creating prosperity goes far beyond quarterly results, as laid out in our 2019 Prosperity Report,” concluded Wilson.
Q1-2020 Report Highlights:
- Total revenue of $10.08 billion in the first quarter of 2020 decreased 8.3% compared to the prior year quarter, primarily driven by net realized capital losses of $462 million in the first quarter of 2020 compared to gains of $662 million in the first quarter of 2019.
- Net investment income decreased 35.0% in the first quarter on lower performance-based results. Property-Liability insurance premiums earned increased 4.4%.
- Net income applicable to common shareholders was $513 million, or $1.59 per diluted share, in the first quarter of 2020, compared to net income of $1.26 billion, or $3.74 per diluted share, in the first quarter of 2019.
- Higher underwriting income was more than offset by net realized capital losses and pension and other postretirement remeasurement losses.
- Adjusted net income* of $1.14 billion, or $3.54 per diluted share, for the first quarter of 2020 was above the prior-year quarter, primarily due to higher underwriting income.
- Property-Liability written premium of $8.59 billion increased 3.2% in the first quarter of 2020 compared to the prior year, driven by higher average premiums and policy growth in the Allstate brand. The recorded combined ratio of 84.9 in the first quarter of 2020 generated underwriting income of $1.35 billion, an increase of $645 million compared to the prior-year quarter, primarily due to lower catastrophe losses, increased premiums earned and a decline in auto losses, partially offset by the Shelter-in-Place Payback expense.
- Allstate brand auto insurance net written premium grew 3.3%, and policies in force increased 0.9% in the first quarter of 2020 compared to the prior-year quarter.
- Allstate brand homeowners insurance net written premium grew 3.4%, and policies in force increased 0.9% in the first quarter of 2020 compared to Q1-2019.
- Esurance brand net written premium decreased 2.3% in the first quarter of 2020.
- Encompass brand net written premium decreased 0.9% in the first quarter of 2020 compared to the prior-year quarter, driven by a decline in policies in force.
GEICO/Berkshire Hathaway CEO – “We are a young country…but what we have achieved is miraculous.”
Berkshire Hathaway made this and other statements during his appearance a the virtual Berkshire Hathaway annual meeting held on May 2, 2020, in Omaha. The following are excerpted results from the company’s 10-K Filing.
Select comments on Q1-2020:
Our insurance businesses generated after-tax earnings from underwriting of $363 million in the first quarter of 2020. Insurance underwriting results in 2020 included earnings from primary insurance and losses from reinsurance, which were net of gains from foreign currency remeasurement applicable to certain reinsurance liabilities. After-tax earnings from insurance investment income increased 12.0% in the first quarter of 2020 compared to 2019, attributable to higher dividend income…
“Additionally, our underwriting results for the first quarter of 2020 were negatively affected by estimated losses and costs associated with the COVID-19 pandemic, including estimated provisions for claims and uncollectible premiums and incremental operating costs to maintain customer service levels. The potential effects of the pandemic may be further affected by judicial rulings and regulatory and legislative actions pertaining to insurance coverage and claims that we cannot reasonably estimate at this time. We also anticipate our underwriting results in 2020 will be affected from lower premiums for certain business attributable to premium credits granted to policyholders and when premiums are a function of the insured’s payroll.
Q1-2020 Report Highlights:
- GEICO Premiums written and earned in the first quarter of 2020 increased 4.5% and 5.6%, respectively, compared to 2019. The premium increases were primarily attributable to voluntary auto policies-in-force growth of 6.5% over the past twelve months, partially offset by a decrease in average premiums per auto policy due to coverage changes.
- The increase in voluntary auto policies-inforce primarily resulted from new business sales and a decrease in the number of policies not renewed. Voluntary auto policies-in-force increased approximately 380,000 during the first quarter of 2020.
- Losses and loss adjustment expenses in the first quarter of 2020 increased $210 million (3.2%) compared to 2019. GEICO’s ratio of losses and loss-adjustment expenses to earnings in the first quarter of 2020 was 74.3%, a decrease of 1.8 percentage points from 2019, which reflected declines in claims frequencies and increases in claims severities.
- Claims frequencies in the first quarter of 2020 were lower for property damage and collision coverages (twelve to fourteen percent range), personal injury coverage (nine to eleven percent range) and bodily injury coverage (six to eight percent range)
- Underwriting expenses in the first quarter of 2020 were $1.4 billion, an increase of $63 million (4.9%) over 2019. GEICO’s underwriting expense to premiums earned ratio in the first quarter of 2020 was 14.9% compared to 15.0% in 2019.
- BH Primary generated pre-tax underwriting losses of $33 million in the first quarter of 2020 and $30 million in the first quarter of 2019. Underwriting results in the first quarter of 2020 included claim cost estimates and allowances for credit losses attributable to the pandemic, partly offset by lower other underwriting expenses. Losses and loss adjustment expenses incurred also included reductions for prior years’ loss events of $24 million in 2020 and $17 million in 2019, which was net of an increase in estimated ultimate claim liabilities for legacy casualty exposures.
- As for the Berkshire Hathaway Reinsurance Group, Property/Casualty premiums written increased $514 million (14.5%) in the first quarter of 2020, while premiums earned increased $401 million (17.3%) over 2019.
- BH Reinsurance Group losses and loss adjustment expenses in the first quarter of 2020 increased $346 million (19.5%) over 2019. Losses and loss
- adjustment expenses reflected estimated COVID-19 related claims of approximately $230 million in 2020 and relatively insignificant losses from changes in estimated ultimate liabilities for prior years’ loss events.
- Life/health premiums earned were $1.4 billion in the first quarter of 2020, an increase of $327 million (31.8%). The increase in life/health premiums earned reflected $168 million from a single reinsurance contract covering health insurance risks beginning in the fourth quarter of 2019 and volume growth in several international life markets and in U.S. individual life and health business, partially offset by the unfavorable effects of foreign currency translation attributable to a stronger U.S. Dollar. The life/health business produced pre-tax underwriting losses of $229 million in the first quarter of 2020 compared to pre-tax earnings of $280 million in 2019.
Progressive CEO – “We also care immensely about our partners in helping them get through this trying time.”
The following are select comments that Susan Patricia Griffith, the President, Chief Executive Officer & Director of Progressive made during the latest Progressive Q1-2020 earnings call on May 6, 2020.
“I’d like to make just a few remarks of how Progressive has responded to COVID-19 because I’m extraordinarily proud of my team and the nearly 43,000 people that make Progressive the incredible company and culture that we all enjoy. As you know, with our incredible growth over the past several years, I’ve had the opportunity to welcome thousands of new people into Progressive. I take an hour to meet with new hires and talk about our core values and our culture. I sometimes struggle to describe our special culture because it is somewhat indescribable. I usually say that it becomes crystal clear when something really great happens or when there is a crisis. This unprecedented situation has allowed all of our Progressive family to visibly live our core values and concretely understand why this is such a unique place. The actions we have taken for both our employees and customers have absolutely created and reinforced their loyalty to Progressive…
“We also care immensely about our partners in helping them get through this trying time. For our body shops and independent agent partners, it’s about loyalty but it’s also about minimizing the disruption of our supply chain as we get on the other side of this crisis. For our more than 35,000 independent agents, we are partnering with agent associations to provide over $2.5 million in grants to help agents address new challenges presented by the virus, and we’re also administering an internal fund to provide additional target relief to our agents. Additionally, we’ve made over $40 million available to agents by advancing performance bonus payments to more than 4,500 of our agents. While the opportune period is still open, to date, we’ve had over 1,600 agents opt-in for a total of $20 million.”
Select comments on Q1-2020:
” During March, we began to experience the impact from the social distancing and shelter-at-home restrictions that were put in place in response to COVID-19. Net premiums written, losses and loss adjustment expenses (LAE), and underwriting expenses experienced the most significant changes during the month.”
Q1-2020 Report Highlights:
- Consolidated net income was reported as $692.7 Million for the Quarter, representing a 36% drop from the $1,078.4 reported during the first quarter of 2019.
- Net premiums written were $9,871.3, a 7% increase over the 2019 numbers for the same time period.
- Net premiums earned also saw an increase in Q1-2020 over Q1-2019 increased to $9.4 billion, representing an 11% increase.
- The combined ratio was 77.1% in March and 86.9% for all of the First Quarter, compared to 88.8 in Q1-2019
- The year-over-year reduction in net premiums written for the month reflects decreases in both new applications and average written premiums per policy, as well as the $110.5 million reduction in our transportation network company business net premiums written
- Compared to the prior year, for the first week of fiscal March, which was pre-COVID-19 restrictions, our personal auto new application growth was over 2%.
- Post COVID-19, new auto applications decreased about 23% for the last three weeks of the month after restrictions were in effect.
- Policies in force growth was only down slightly from February month-end as increases in renewal applications in part offset the decreases in new applications.
- The companywide loss/LAE ratio for March was 16.3 points lower than the ratio reported on a year-to-date basis through February 2020. For the month, the incurred losses and LAE reflect the decrease in auto accident frequency that we experienced as a result of the COVID-19 restrictions, and were in part offset by $103 million of reserve increases based on actuarial analysis of the ultimate costs of claims incurred through the end of the month.
- During the month, based on an evaluation of the recoverability of our premiums receivable in light of the billing leniencies we had in place during the month, including our program to not cancel or non-renew due to non-payment and pause collection efforts, and considering the impact of the moratoriums in place through May 15, 2020 on earned but uncollected premiums at month-end, we recognized an additional allowance for doubtful accounts, which increased our underwriting expense ratio and combined ratio about 2.4 points.
- It is estimated that there were about 200,000 personal auto policies that remained in force at month-end as a result of the billing leniencies in place during the month.
Vermont Mutual CEO – “…[N]one of these historic results would have been achieved without the expert knowledge, dedication, and hard work of the entire Vermont Mutual team, including our independent agency partners, reinsurers and business associates.”
While Vermont Mutual does not issue quarterly reports, it did issue a release after the close of its 193rd Annual Meeting held at its headquarters in Montpelier on April 22, 2020. The company said its meeting was notable for a number of reasons, with many of the company’s best results having been surpassed in 2019.
Vermont Mutual’s Chairman, President, CEO, Dan Bridge, remarked “It is rather unusual to be speaking about the exceptional results of 2019 during this most unprecedented and uncertain time. But while we review the results of 2019, our thoughts are with all of those affected by the present Covid-19 situation, including the heroic efforts of everyone serving on the front lines.”
The meeting was also the first in the company’s history to be held “virtually” due to the current COVID-19 pandemic that has resulted in much of the world being quarantined and working in isolation.
Select comments on Q1-2019:
“In 2019, we were pleased to achieve many notable firsts. During the course of the year, the company increased its direct written premium by 5.4%, to close the year at a record high of $521.1 million. Historic surplus growth of 18.5% resulted in an overall policyholder surplus of $584M. This improved our premium to surplus relativity to 0.81, another company first. In addition, our combined ratio of 88.0% produced record underwriting income of $51.3 million, also a new best.”
Bridge added “But none of these historic results would have been achieved without the expert knowledge, dedication, and hard work of the entire Vermont Mutual team, including our independent agency partners, reinsurers and business associates”.
Elections during the meeting:
- Daniel C. Bridge, Chairman, President, and Chief Executive Officer
- Mark J. McDonnell, Executive Vice President, and Chief Operating Officer
- Richard N. Bland, Vice President, General Counsel, and Secretary
- Susan L. Chicoine, Vice President Human Resources
- Bryan Mjannes, Vice President Information Technology
- David N. DeLuca, Vice President Claims
- Brian C. Eagan, Vice President, Chief Financial Officer, and Treasurer
- Shaun P.T. Farley, Vice President Marketing
- Terry J. Moore, Vice President Underwriting
- Jonathan R. Becker, Vice President Underwriting
The Annual Meeting also noted the selection of the company’s new, incoming Vice President of Underwriting, Jonathan Becker, set to assume the duties of retiring Vice President, Terry Moore.
