Carrier Perfomance

Carriers See Strong First Half

Earnings are up in P/C segments for many carriers, with high expectations for full year profits.
By: | September 5, 2014 • 4 min read

Carriers are enjoying a profitable second quarter and first half of 2014, thanks in part to fewer natural catastrophes and weather-related losses, as well as strong underwriting.

“There has been less catastrophic activity,” said Andrew Colannino, vice president at A.M. Best. “Those focused on property may have seen fewer losses.”

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“2014 will go on the books as one of the better years for the industry, barring any major catastrophe,” said Cliff Gallant, managing director of equity research for Nomura Securities. “Through the first six months of the year, we did have some tornadoes and some hail losses; it wasn’t completely quiet, but so far it’s a normal year.”

In addition to the absence of major catastrophes, “the industry is also benefitting from reserve releases from several years of good pricing and fairly benign inflation trends,” Gallant said. “There are reasons to be worried about the outlook, but at this point the industry is still enjoying some very good underwriting years.”

Gallant pointed to increased pressure on pricing – on both the insurance and reinsurance sides – and more signs of competition as possible impediments to continued growth.

“Investment yields are still pretty weak, so investment income growth will probably be weak, and some of those reserve releases might start to slow as well,” he said.
Allianz reported total revenues for the second quarter up 10 percent from the same period last year, while the operating profit was up 17 percent. Gross premiums written in property and casualty alone reached about $14.3 billion.

“In the second quarter, the segment property and casualty insurance again contributed roughly half to Allianz Group’s operating profit,” according to the company. “The impact from natural catastrophes was lower compared to the high level of the second quarter of 2013 and the underwriting result improved.”

Zurich echoed that experience. “In general insurance, business operating profit increased considerably, driven by a substantially improved net underwriting result reflecting the favorable underlying loss experience and the absence of major catastrophe and weather-related losses, especially when compared with the prior year period,” its report stated.

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“Zurich remains especially strong in the large commercial business, with a lot of the operating profit generated in North America while mature markets remained generally stable,” said Bjorn Emde, Zurich’s senior media relations manager. “We saw an improvement in the underlying profitability and in the expense ratio while profiting from a positive development in catastrophe losses compared to the prior year period.”

Zurich posted a business operating profit of $1.2 billion for the second quarter, up 32 percent from last year, with a half year operating profit of $2.6 billion, up 15 percent.

Part of its success can also be attributed to organizational streamlining, which affected 670 positions across the company.

“This will make our decision-making processes quicker and leaner,” Emde said.“Apart from making the company more agile, we also expect to generate cost savings of roughly $250 million per year by the end of 2015.”

ACE Group also saw strong performance in property and casualty lines. Global earnings from P&C net premiums increased about 8.5 percent on a constant-dollar basis, according to the company’s earnings report.

CEO Evan Greenberg said in the report, “P&C underwriting income was up 10 percent with a combined ratio of 87.5 percent. The growth in underwriting was driven by current accident year underwriting income before catastrophe losses.”
Boston-based Liberty Mutual ended the second quarter with a consolidated net income of $388 million, with $650 million in net income for the first half of the year.

Second quarter revenues were up 3 percent from last year at nearly $10 billion. Net written premiums also saw an increase of 5.2 percent at $9 billion. That improvement, however, came in spite of large catastrophe losses.

“Underwriting improvements lowered the combined ratio by a point despite sizable severe storm losses,” CEO David Long said in an earnings report. Liberty Mutual’s catastrophe losses for the second quarter were $676 million, an increase of $29 million, or 4.5 percent over the same period in 2013.

“In short, we continue to improve underwriting results and grow where we can do so profitably,” Long said.

Zurich and Allianz also reported being on track to achieve improved profit outlooks for the full year. Zurich “projects full year cash remittances in excess of $3.5 billion, ahead of 2013.” Allianz confirmed an operating profit outlook for 2014 of about $13.2 billion.

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These are just a few examples of earnings by insurers in the property and casualty segment.

Improved overall economic conditions could also be a contributing factor to higher earnings, A.M. Best’s Colannino said, but there is still variability among market leaders. Those with more focus on property are more susceptible to catastrophe losses; severe storm activity will have to remain low in order to hit full year projections.

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]