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Aon & NAMIC report underlines financial strength of mutual insurers

30th September 2019 - Author: Matt Sheehan

A new report by re/insurance broker Aon and the National Association of Mutual Insurance Companies (NAMIC) has underlined the overall strength and stability of mutual companies.

profit-growthThe report included a comparison of nearly 30 performance metrics across mutual, stock, and other categories.

Aon and NAMIC reported that 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, compared to $1.20 for stock insurers.

The dividend ratio was also found to be five time larger for mutual than for stock companies, while capital and surplus in the mutual segment grew by 1.8%, compared to a decline of more than 3% for stock companies due to higher underwriting costs.

The report also determined that mutual companies were generally well capitalised with median Best’s Capital Adequacy Ratio (BCAR) at the VaR 99.6 of 59%, 10 points higher than stock companies at 49%.

Ninety percent of mutual companies also have the “Strongest” or “Very Strong” balance sheet strength, compared to 78% for stock companies, analysts noted.

“The expanded scope of data analyzed for the 2019 report clearly shows when it comes to operating performance and agency ratings, mutual insurers remain consistently strong,” said Neil Alldredge, NAMIC’s senior vice president of corporate affairs.

“It also validates that the mutual structure, which stresses the alignment of company and policyholder interests, serves both equally well,” he added.

Chris Delhey, Aon’s mutual insurance practice group leader, also commented: “Aon is very excited to partner with NAMIC on this important study, which includes a comprehensive analysis of the performance of more than 600 insurers under AM Best’s BCRM framework.

“It 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.”

Aon and NAMIC also surveyed commercial insurance purchasers as part of the report, finding that 95% of respondents were aware of mutual insurance companies, while 65% held a favourable view of them.

Of those who considered themselves more familiar with mutual insurance companies, that favourability number rose to 87%.

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