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Hello Friends! The main news of the week was a slew of earnings and results from insurers. Heavy losses continue, earnings from Hippo and the first public report from Skyward Specialty and Progressive discusses their telematics strategy. Here are the three things we learned: |
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Heavy Losses Amidst Economic Challenges State Farm reported a $13.2 B underwriting loss. Probably the most eye-popping headline of the week. The 2022 underwriting loss was due to significantly higher auto and homeowners claims and catastrophe losses. Fortunately they remain financially strong but this is perhaps the biggest example of the difficult environment that personal lines writers face. Berkshire Hathaway’s annual report outlined GEICO’s $1.88 B loss. They voluntarily reduced auto policies-in-force by 1.7 million a move that looks to be focusing on the most profitable and low risk drivers, more on that later. Mr. Buffett commented on other insurance operations explaining that Alleghany helped them increase their insurance float from $147 billion in 2021 to $164 billion in 2022. Since purchasing their first insurer in 1967 Berkshire’s float has increased 8,000 fold through acquisitions, operations and innovation. Nationwide’s operating income fell to $1.4B in 2022 from $2.8B in the year prior and their total company assets decreased by $25.5B. Cat losses represent 12% of their loss ratio and has doubled over the past decade in what the CFO describes as the ‘most dramatic economic conditions in more than 50 years’. Argo reports a $111.8M loss as the Brookfield acquisition looms. They have also asked to delay their 10-K filing. |
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Upstart Results Less Dramatic Hippo earnings read similarly to the other public insurtechs. They are growing premium and reducing loss ratio but it is still very hard to see when they will become profitable. What does look promising for them is their strategy to be diversified with a digital insurance marketplace First Connect Insurance Services and fronting operation Spinnaker. Instead of having to rely on becoming profitable in the difficult homeowners market they have the opportunity to pivot into other directions acting as an intermediary and receiving fronting fees for specialty programs. Skyward Specialty had their first public earnings release. Their CEO says that they will start to slow underwriting hiring but continue looking for top talent. Their net written premium grew 27.6% and they have a healthy combined ratio of 92.4 making their stock steady since the IPO earlier this year. They outlined growth areas in surety, professional lines and transactional excess and surplus. |
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Progressive’s UBI / Telematics Strategy Progressive’s CEO took an opportunistic stance in a recent investor presentation saying they will seek new auto business as rates near adequacy. They have been offering usage-based auto insurance for 25 years, a pioneer in telematics, they have amassed billions of miles of data. They are making moves to incentivize drivers to switch to their telematics program increasing the enrollment discount from 10% to 15%. As throughout their history, they know they can use data to stay ahead of trends and continue pricing discipline. In related news, Cambridge Mobile Telematics, the world-leading telematics provider, announced their intent to purchase European-based Amodo. CMT serves 21 of the top 25 insurers in the US, this acquisition will extend their functionality and reach globally and especially in Europe. |
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