Released during NAMIC’s 124th Annual Convention, the new expanded edition of the Mutual Factor includes a comparison of nearly 30 metrics across mutual, stock, and other categories. And just as the first report did last year, this new analysis adds further evidence to support the overall strength and stability of mutual companies. The 2019 report, developed jointly by NAMIC and Aon, not only looks at key market performance metrics for mutuals, but also at how mutuals are rated under the AM Best Credit Rating Methodology Framework.
The 2019 Mutual Factor broadens the scope of the data analyzed from 16 metrics in 2018 to 28 metrics in 2019. And, thanks to the involvement of Aon, the new Mutual Factor also takes a comprehensive look at the performance of more than 600 insurers under the BCRM framework. The bottom line is – like last year’s report – mutuals remain consistently strong, with more data to substantiate that statement.
The key findings in the Mutual Factor include:
Mutual insurers were slightly less leveraged than their stock counterparts in 2018, with $1.23 in policyholder surplus backing up each dollar in net premiums written compared to $1.20 for stock insurers.
In 2018, the dividend ratio, a gauge of the proportion of premium returned to policyholders, was five times larger for mutuals than for stock companies.
Capital and surplus in the mutual segment grew by 1.8 percent in 2018, an improvement in comparison to stock companies that saw surplus growth decline by more than 3 percent due to higher underwriting costs.
Mutual companies are well capitalized with median Best’s Capital Adequacy Ratio at the VaR 99.6 of 59 percent, 10 points higher than stock companies at 49 percent. Ninety percent of mutual companies also have the “Strongest” or “Very Strong” balance sheet strength, compared to 78 percent for stock companies.
How mutuals compare to other in the property/casualty insurance industry
How mutuals stack up against AM Best ratings
What commercial insurance customers think about mutuals
The 2018 Mutual Factor was developed jointly by NAMIC and Robert Hartwig, Ph.D., director of the Center for Risk and Uncertainty Management at the University of South Carolina. The analysis evaluated 16 different performance metrics for 2017, comparing mutuals, stock companies, and other insurers.
Among the key findings of the study were:
Mutual insurers were less leveraged than their stock counterparts in 2017, with $1.89 in policyholder surplus backing up each dollar in net premiums written, compared to $1.64 for other insurers.
The dividend ratio, a gauge of the proportion of premium returned to policyholders, was eight times larger for mutuals.
Mutual companies are more likely to temper the pace of rate increases, resulting in greater price stability, because they are not as driven by the need for short-term profitability.
Capital and surplus in the mutual segment grew by more than 8 percent in 2017 – very strong by historical standards and despite heavy CAT losses.