Total premiums earned have increased over the past nine consecutive years according to the latest Report on Profitability By Line By State in 2019. The annual report released by the National Association of Insurance Commissioners (NAIC) analyzes the results of the major lines of business, state-by-state with the goal of providing greater transparency into “the financial impact the economic climate has had on each of these lines”.
The NAIC notes that when coupled with other revelant data, this report is useful in providing “further analysis of competition and market performance.”
Key highlights from this year’s report:
The NAIC highlighted the following data reports from this year’s report:
- Total premiums earned increased over the nine years included in the report, while losses incurred, and loss adjustment expenses have remained relatively flat.
- The countrywide direct return on net worth for the total property and casualty insurance market increased for a second consecutive year to 8.6%.
- Private Passenger Auto (PPA) makes up a large portion of the Property & Casualty market, accounting for approximately 37% of the total direct premiums earned in 2019.
- The return for PPA decreased minimally over the prior year moving from 7.5% in 2018 to 7.15% in 2019.
- In 2018 and 2019, losses and loss adjustment expenses accounted for over 70% of direct premiums earned countrywide for all property and casualty lines combined.
How the NAIC compiles its data
According to the NAIC, the Report on Profitability By Line By State in 2019 compiles data from the annual statement exhibits its receives. From there, it compiles ‘exhibits to develop estimates of profits on earned premium and the return on net worth by line and by state.’ In addition, the report includes the various components of estimated profits including:
- premiums earned;
- losses incurred;
- loss adjustment expense;
- general expenses;
- selling expenses;
- state taxes,
- licenses and fees;
- dividends to policyholders;
- changes in premium deficiency reserves;
- underwriting profits;
- investment income and federal income taxes.
As fluctuations in calendar year financial results occur, long-term historical averages are also provided.
A quick look at Profitability By Line of Insurance in Massachusetts & New England
There is quite a bit of data in the annual Profitability report. While Agency Checklists could not cover all of it here, the following are some charts we made based upon data we obtained for the Massachusetts insurance marketplace as well as the five other New England states.
For those interested in viewing the full report, it can be accessed on the NAIC website.
