Private Auto Premiums See Largest Q3 Growth in 10 Years: SNL

Private auto insurance industry direct premiums written rose 5.13 percent in the third quarter of 2014, the largest third-quarter year-over-year growth in the past 10 years, according to an analysis by SNL Financial.

The 30 largest auto writers by market-share also grew at a healthy pace, adding 4.86 percent year-over-year to reach $42.98 billion in direct premiums written. Of these 30 insurers, almost one-third reported an increase of more than 5 percent.

The data used is sourced from the National Association of Insurance Commissioners (NAIC) quarterly filings and is the aggregate of the auto physical damage and private auto liability lines of business. Auto physical damage includes business from commercial auto physical damage. Personal-only auto physical damage is not reported separately in the NAIC quarterly statements.

Personal auto physical damage typically makes up the vast majority of the total auto physical damage. In 2013, 91.78 percent of auto physical damage premiums were from personal business. For large auto insurers such as State Farm Mutual Automobile Insurance Co., GEICO Corp. and Allstate Corp., these percentages were even higher. The personal share of auto premiums for each of these entities was approximately 99 percent in 2013.

Highest Increases

State Farm reported a 6.13 percent year-over-year increase in private auto business, the highest for any quarter in the past 10 years, on top of its already large premium base.

GEICO posted the largest growth rate among the top 30 insurers in the third quarter. The company’s direct premiums written rose 10.31 percent compared to the same quarter in the prior year, continuing its double-digit growth of more than 10 percent on a year-over-year basis for eight quarters in a row.

GEICO appears to be on the verge of passing $20 billion in annual auto premium in 2014. The company has written $15.48 billion in direct personal auto premiums for the nine months ended Sept. 30. It needs approximately $4.52 billion in the fourth quarter to cross $20 billion, less than the $4.54 billion it wrote in the fourth quarter of 2013. GEICO has never reported a negative year-over-year growth rate in any quarter in the past 10 years.

Allstate recorded private auto direct premiums written growth of 5.46 percent year-over-year in the third quarter. This is the second consecutive quarter in which the company reported premium growth of more than 5 percent after premiums grew 5.67 percent year-over-year in the second quarter. The Encompass brand reported an auto loss ratio of 78 percent in the third quarter, an increase of 7.1 points compared to the previous year due to unfavorable reserve re-estimates, according to Allstate’s latest Form 10-Q filing. The Esurance and Allstate brands each experienced a modest decline in their auto loss ratios.

Biggest Decline

Kemper Corp. continued its slide, recording the largest year-over-year decrease among the top 30 insurers as its premiums fell 12.59 percent to $204.6 million. Kemper attributed the decline to the runoff of its direct-to-consumer business in its latest earnings call.

Kemper on Dec. 11 announced that it entered into a definitive agreement to acquire Alliance United Group and its subsidiaries in a deal that might help Kemper reverse its downward trend in the auto insurance business. Alliance United Insurance Co., the underwriting subsidiary of Alliance United Group, grew at least 29 percent year-over-year in the past five years except 2011, when it grew just 8.17 percent. The company is expected to write more than $300 million in 2014 direct premiums. According to an SNL study, this deal should increase Kemper’s private auto marketshare in California where Alliance United is one of the top five writers of nonstandard auto insurance.

Farmers Insurance Group of Cos. reported a modest decrease of 1.07 percent in premiums during the quarter compared to the same quarter in 2013 and continued its slide in the ranking list. USAA Insurance Group displaced Farmers to take the sixth spot by growing 7.06 percent during the quarter. USAA also reported a loss ratio of 75.96 percent, one of the highest among the top auto insurers. Officials from Farmers provided some details on the company’s strategy at a recent investor day held by Zurich Insurance Group Ltd.

USAA passed Farmers for the first time in terms of auto premiums written on last-12-months basis during the third quarter. USAA and Farmers reported premiums written of $9.68 billion and $9.62 billion, respectively, on last-12-months basis.

Auto Club Insurance Association Group reported a loss ratio of 28.16 percent during the quarter, primarily due to Auto Club Insurance Association, which reported negative losses incurred in the quarter. Auto Club Insurance Association reported a higher loss ratio for its auto insurance business in recent times. Its private auto direct loss ratio was 146.49 percent and 490.21 percent in 2013 and 2012, respectively.