As one leading writer of high-net-worth personal lines business lays the groundwork to pull out of the market, other participants issued relatively bullish outlooks for their growth prospects.
Various factors have coalesced over the past 30 months to make the US personal lines business a challenge for national and regional carriers, alike, including the effects of rampant loss-cost inflation, concerns about the availability and affordability of reinsurance coverage, the perceived limited investor appetite for volatile financial results, and widespread worries about the implications of changing weather patterns. The unique attributes of the high-net-worth market have amplified some of these pressures.
Against this backdrop, a number of the top 20 personal lines carriers, including the likes of The Allstate Corp., The Progressive Corp. and the Farmers Insurance Group of Cos., have made some difficult decisions about the composition of their books of business. Progressive, for example, said in November 2023 that it was non-renewing 115,000 policies in its property insurance business in Florida, where President and CEO Tricia Griffith said the company was "not making money." Nationwide Mutual Insurance Co. went a step further, moving to exit its high-net-worth personal lines business altogether in a decision first discussed in an October 2023 news release and fleshed out more recently in a series of product filings obtained by S&P Global Market Intelligence.
Brighter days are on the horizon for the personal lines business, generally, and public company fourth-quarter 2023 earnings reports suggest they might have already arrived in the high-net-worth niche.
The move by Nationwide to non-renew its entire US book of private client homeowners, private auto, personal collections and excess liability business is particularly notable given the broad enthusiasm with which a number of carriers pursued the high-net-worth market during the mid-2010s.
The landmark 2016 merger of the former ACE Limited and Chubb Corp. into what is now Chubb Ltd. brought together two of the fast-growing market's leading players, with ACE having cemented its role in the business months prior by taking on the high-net-worth personal lines business of Fireman's Fund Insurance Co. Amid the concentration of what had been three competitors into one, the likes of W. R. Berkley Corp., Cincinnati Financial Corp. and the Allied World-sponsored Vault Reciprocal Exchange joined Chubb and other incumbents American International Group Inc. and Privilege Underwriters Reciprocal Exchange, or PURE.
In more recent years, Tokio Marine Holdings Inc.'s HCC Insurance Holdings Inc. acquired PURE's management entity, an investor group took majority control of Vault's attorney-in-fact, and AIG partnered with Stone Point Capital LLC to transition its Private Client Services high-net-worth business into a new independent managing general agency called Private Client Select Insurance Services.
Even Nationwide's Crestbrook Insurance Co., the underwriter of the private client business, said in its notices to withdraw from the applicable product lines in several states that the high-net-worth market is "healthy and competitive."
Crestbrook, in a Kentucky filing dated Jan. 4, referenced Chubb, PURE and Cincinnati along with The Travelers Cos. Inc. and the group led by State Farm Mutual Automobile Insurance Co. as offering similar products. The company indicated that it had already discontinued writing new business and that it intends to finish the non-renewal of its in-force book by June 2025. Other Nationwide products are not impacted.
The various filings said the withdrawal comes "[i]n response to changing markets." And Nationwide said in October 2023 that it planned to narrow its private client appetite as part of a shift to a single operating model for its personal lines business.
In June 2023, the company announced that it would be taking certain actions in its personal and commercial lines portfolios in response to "[s]trong headwinds brought on by the economic environment, catastrophic weather events and the impacts of inflation [that] continue to impact the entire insurance industry." Various news reports have detailed actions by Nationwide to require certain documentation from prospective customers and to non-renew certain risks in North Carolina and Florida, for example.
Underwriting profitability has been elusive for Crestbrook during what was one of the most challenging periods in decades for its two primary lines of business.
Crestbrook is subject to a 100% pooling arrangement with Nationwide Mutual so it does not show underwriting results on a net basis. But its direct-based combined ratio in an aggregation of the home, private auto and other liability lines exceeded 110% four times in a five-year stretch from 2018 through 2022, according to S&P Global Market Intelligence data, with results exceeding 120% in 2021 and 2022. The direct combined ratio peaked at 175.8% in 2018 when multiple wildfires ravaged California, Crestbrook's largest state.
Direct incurred loss ratios on Crestbrook's personal lines business exceeded 80% seven times during an eight-quarter timeframe ended Sept. 30, 2023, underperforming the Nationwide group's overall personal lines results by significant margins in each of those reporting periods. Crestbrook's personal lines direct incurred loss ratios have also materially underperformed the US P&C industry's results in recent periods, including by 9.2 percentage points for the first three quarters of 2023.
The company reported direct premiums written in the home, private auto and other liability lines of $380.7 million in full year 2022. Through the first three quarters of 2023, Crestbrook posted direct premiums written in the combination of the home and private auto lines of $247.6 million, which represented a year-over-year increase of 5.2%.
But Crestbrook's results and retreat are not necessarily indicative of the high-net-work market as a whole. The North American personal insurance business of Chubb, for example, reported what Chairman and CEO Evan Greenberg described on a Jan. 31 conference call as "a simply outstanding [fourth] quarter and year." The segment's fourth-quarter 2023 combined ratio was a highly favorable 86.2%, or 80.4% excluding catastrophe losses.
Chubb joined Berkley, The Cincinnati and PURE among the high-net-worth personal lines writers that generated double-digit growth in the combination of their home and private auto businesses during the first three quarters of 2023, according to statutory filings. Our analysis does not focus on overall business at Crestbrook and its peers as many write material amounts of business aside from the core high-net-worth personal lines product suite. Additionally, it is generally not possible to isolate results largely attributable to high-net-worth clients at traditional standard and preferred carriers.
Both Chubb and Berkley see strong momentum as 2024 begins in a circumstance that a competitor's exit could accentuate. Greenberg said that Chubb's North American personal lines business saw new business growth of 34% in the fourth quarter of 2023. W. R. Berkley President and CEO Rob Berkley, speaking during a Jan. 24 conference call, said he sees "meaningful opportunity" to take advantage of rate increases in the company's high-net-worth segment.