Homeowners Insurance YOY Premium Growth Rate Hits Lowest Level Since 2008

Bad weather led to a spike in homeowners insurance claims during the first half of 2016, and the annual yearly written premium growth rate for the industry fell to its lowest level since 2008.

The top 20 homeowners insurers by market share saw direct written premiums tick up 2.69% during the year, according to an S&P Global Market Intelligence analysis.

Sandler O'Neill analyst Paul Newsome said the overall homeowners market seems to be stabilizing as prices have steadied recently and the business has been more profitable relative to past performance.

"For the most part, it's a reflection that the industry has reached some level of price adequacy, at least a price level that it's comfortable with," Newsome said.

There is still underlying growth in the line as more homes are being built, he added.

The industry's combined ratio deteriorated slightly to 92.74% in 2016 from 91.34% in 2015. The higher combined ratio, however, is well below the levels experienced by the industry prior to 2013 when they reached over 100%.

Market share for top homeowners insurers

State Farm Mutual Automobile Insurance Co. held the top share position once again in 2016, controlling 19.24% of the market. The rankings of the top 10 companies by market share in the homeowners insurance industry were unchanged year-over-year in 2016.

In second, Allstate Corp. claimed 8.64% market share. During a February 2 earnings call, Chairman and CEO Tom Wilson said the line is generating strong returns, despite higher catastrophe losses. The company saw catastrophe losses of almost $2.6 billion in 2016, which was up $853 million year-over-year.

USAA Insurance Group's 73.94% loss ratio was the highest of the group by over 10%, due primarily to weather. In the management discussion and analysis section of the company's annual statement, executives said the company experienced a historic year of catastrophe losses and claims, including a significant hailstorm in San Antonio that affected a notable concentration of its policyholders.

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Nationwide Mutual Group was the only company among the top 20 insurers to report a combined ratio over 100%. In a regulatory filing, management said weather-related losses totaled $1.6 billion for 2016, mostly due to Hurricane Matthew and severe weather in the first half of the year.

American International Group Inc. had strong growth in homeowners, despite the fact that it shrank many business lines in 2016. The company is a big player in high-net-worth home insurance, Newsome said. While other parts of AIG's business have struggled, its high-net-worth personal lines business has stayed fairly stable in terms of business management, he added.

Newsome pointed out that AIG may have benefited from market dislocation courtesy of Chubb Ltd. acquiring several major writers of high-net-worth home insurance. In early 2016, ACE Ltd. completed its acquisition of Chubb Corp. to form Chubb Ltd. and purchased the renewal rights for Fireman's Fund Insurance Co.'s high-net-worth personal lines. Chubb Ltd. ranked ninth in this analysis with 2.95% market share.

With 3.70% market share, Travelers Cos. Inc. President and COO Brian MacLean reiterated the company's focus on growing its homeowners book during an April 20 earnings call.

Newsome said he does not think pricing or market share in the homeowners line will shift much. But he is curious what companies will say about home insurance underwriting technology during first-quarter earnings calls.

"My personal view is that the home insurance business is underwritten in a way that's fairly primitive relative to auto," he said. "There's a lot to be done within the home insurance business to better write it."

Learn more about the tools used to conduct this analysis here.

Feb 03, 2017