Mutual insurers better capitalised than stock counterparts

24-09-2019

Mutual companies were better capitalised that stock companies in 2018, according to a report by the National Association of Mutual Insurance Companies (NAMIC) and Aon. 

The report, titled The Mutual Factor: How Performance, Structure, and Focus Set Mutual Insurance Companies Apart, found that mutuals had a median Best’s Capital Adequacy Ratio (BCAR) at the VaR 99.6 of 59 percent last year. That was 10 points higher than stock companies at 49 percent. 

The report found the dividend ratio of mutual insurance companies, measuring the proportion of premiums back to policyholders, was five times larger than for stock insurance companies last year. 

Meanwhile capital and surplus in the mutual segment grew by 1.8 percent in 2018, compared to stock companies which saw surplus growth decline by more than three percent due to higher underwriting costs.

The NAMIC and Aon report said 90 percent of mutual companies have the “strongest” or “very strong” balance sheet strength, compared to 78 percent for stock companies. And they were also slightly less leveraged, with mutuals having $1.23 in policyholder surplus backing up each dollar in net premiums written in 2018, compared to $1.20 for stock insurers. 

This year’s report evaluates expanded performance metrics for mutual insurance companies. The updated analysis considered a total of 28 different performance metrics for 2019, comparing mutuals, stock companies, and other insurers. 

The report also incorporated a survey of 553 commercial property/casualty insurance buyers, and found that 95 percent of respondents to the survey were aware of mutual insurance companies and 65 percent held a favorable view of them. Of those who considered themselves more familiar with mutual insurance companies, that favorability number rose to 87 percent. 

NAMIC member companies represent nearly 30 percent of the business insurance marketplace. 

Neil Alldredge, NAMIC’s senior vice president of corporate affairs, said the report showed the strength of the mutual structure, which aligns the interests of the company and policyholder, to the benefit of both. 

“The expanded scope of data analysed for the 2019 report clearly shows when it comes to operating performance and agency ratings, mutual insurers remain consistently strong,” he added.   

Chris Delhey, Aon’s mutual insurance practice group leader, agreed. “[The report] highlights the ongoing financial and operational strength of the mutual insurance sector in the United States, both in their own right and relative to their peers in the wider insurance market,” he said. 

National Association of Mutual Insurance Companies, NAMIC, Aon, Neil Alldredge, Chris Delhey

Bermuda Re