AM Best Information Services

SEPTEMBER 21, 2020 08:30 AM (EDT)

Best’s Market Segment Report: U.S. Mutual Insurance Companies Maintain Premium, Surplus Growth Trends in 2019

 Christopher Jackson
Financial Analyst
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Brian O’Larte
+1 908 439 2200, ext. 5138

Richard Attanasio
Senior Director
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Christopher Sharkey
Manager, Public Relations
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Jim Peavy
Director, Public Relations
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OLDWICK - SEPTEMBER 21, 2020 08:30 AM (EDT)
Despite a highly competitive property/casualty (P/C) industry and pressures on operating performance, rated U.S. mutual insurance companies reported continued improvement in underwriting performance in 2019 and managed to grow surplus, according to a new AM Best report.

A new Best’s Market Segment Report, titled, “U.S. Mutuals’ Strong Balance Sheets at the Fore Amid Pandemic,” states that net premiums written (NPW) for AM Best-rated mutuals grew by a modest 2.6% in 2019. Although the pace has slowed in recent years, rated mutuals have seen NPW growth every year since 2010. Net income decreased more than 16% in 2019 to $16.8 billion, following a strong 2018, when net income tripled due to lower losses from catastrophic events. The lower net income for 2019 was largely attributable to a 7.2% reduction in net investment income and a 32.9% reduction in realized capital gains. The segment recorded a combined ratio of 101.0 in 2019, unchanged from the previous year.

The mutual segment’s policyholders’ surplus increased by 9.6% in 2019 to $349.3 billion, driven by nearly $21 billion in unrealized capital gains, as compared with $14 billion in unrealized capital losses in 2018.

As is true for the rest of the industry, COVID-19 is having a major impact on the mutual insurance segment—from commercial multi-peril exposure to business interruption claims, to extensive reorganization of employee office arrangements, to substantial premium refunds—as the fundamentals of insured exposure have been radically altered. A considerable increase in policyholder dividends in first-half 2020 over the same period in 2019 partially reflects these premium refunds, although some may be reported as other underwriting expense, or even as reduced premiums. The impact of COVID-19 is unlikely to abate and will extend beyond third-quarter 2020 results. Whether the pandemic will reshape a landscape defined by its overall stability remains to be seen.

Over the past 10 years, AM Best-rated mutuals have held approximately 40% of the P/C industry’s market share, virtually unchanged, demonstrating their strong market presence and an ability to effectively react to changing market dynamics.

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AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.