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Protective Insurance sees decline in GWP amid underwriting actions

28th February 2020 - Author: Luke Gallin

Protective Insurance Corporation has reported net income of $3.8 million for the fourth-quarter of 2019, while efforts to improve underwriting profitability resulted in a slight decline in gross written premiums (GWP).

protective-insurance-corporation-logoNet income of $3.8 million represents a significant improvement on the $24.6 million net loss reported for the same period in 2018. For the full year 2019, the company has recorded net income of $7.3 million, against a net loss of $34.1 million a year earlier.

Despite the improvement in net income, Protective Insurance’s underwriting result remained in unprofitable territory for both Q4 and full year 2019, totalling 105.8% and 106.8%, respectively.

While still above the 100% mark, when compared with a Q4 2018 combined ratio of 112.2% and a full year 2018 combined ratio of 108.6%, Protective did improve its underwriting result in the periods, which, as noted by its Chief Executive Officer (CEO), Jeremy Johnson, is an ongoing process.

“I’m pleased with the continued and sustainable progress we’re making towards underwriting profitability. During 2019 we achieved significant rate increases across our commercial automobile portfolio, non-renewed unprofitable risks and reduced exposure to certain segments to accelerate loss ratio improvement,” explained Johnson.

Adding: “We reduced our exposure to higher limits through the use of facultative reinsurance and refocused our distribution strategy on fewer, more valuable relationships. These actions are partially reflected in the improving reported accident quarter loss ratios and will more fully impact results in 2020.

“The industry continued to report unfavorable commercial automobile loss development during 2019. While we experienced unfavorable commercial automobile loss development during the year, the net loss development impact on our financials was minimal, mitigated by our unlimited aggregate stop-loss reinsurance treaties and by favorable loss development in workers’ compensation. We are well positioned to create additional value for all our stakeholders in 2020.”

Protective Insurance’s results also included some unfavourable reserve development, as noted by Johnson. In Q4, unfavourable prior period loss development totalled $1 million, and for the full year this increased to $2.2 million.

At $141.7 million, GWP declined by more than 7% in the fourth-quarter of 2019 when compared with the previous year. For the full year 2019, GWP fell by 1.3% to $574.9 million, which the firm attributes to actions taken to improve underwriting profitability.

During the fourth-quarter of 2019, net earned premiums declined by more than 6% to $111.4 million, but actually increased for the full year by 3.3% to $447.3 million, when compared with 2018. The company notes that for both Q4 and the full year, rate increases and new business policies sold mostly offset declines in premiums.

Net investment income increased by just under 13% in the fourth-quarter of 2019 for Protective, to $6.8 million. For the full year the increase is even more significant at 19.1% to $26.2 million, compared with $22 million a year earlier.

Protective Insurance also provides some details around its rate experience during the year, noting that within its commercial automobile portfolio, it attained rate increases of 13.2% on $48.7 million of premiums available for renewal, during Q4 2019. For the full year, the firm attained rate increases of 12% on $190.8 million of premiums available for renewal.

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