More than 140 insurance carriers, including at least 48 small and regional mutual companies, participated in the U.S. Small Business Administration's Paycheck Protection Program, or PPP, during the second quarter.
Cross-referencing S&P Global Market Intelligence's statutory insurance data with select loan-level detail recently revealed by the SBA reveals finds that entities under current coverage as property and casualty, life and health insurance companies and fraternal benefit societies received approval to borrow between $150,000 and $10 million individually and anywhere from $109.9 million to $249.9 million in the aggregate. Individual disclosures by carrier borrowers provide confirmation that the total amount of applicable loans exceeds the low end of that range.
The data further showed that those loans supported more than 10,000 jobs among the carrier applicants under the program, which served as a key component of March's Coronavirus Aid, Relief, and Economic Security Act.
Results reflect a best-efforts search of as-reported SBA disclosures for entities that borrowed $150,000 or more through loans that received approval through June 30. The SBA disclosed loan-level information, including business names and addresses, within five ranges as opposed to specific amounts. Borrowings attributed in this article to insurance carriers are solely based upon SBA disclosures, and they do not include funds loaned to entities such as noninsurance subsidiaries, affiliated managing general agencies or holding companies, and also exclude underwriters that do not file annual statements with the National Association of Insurance Commissioners. Entities that could not be readily ascertained as an insurance carrier based on data disclosed by the SBA were excluded. Loans of less than $150,000 are also excluded as the identities of the recipients were not released.
The carriers' borrowings represent only a fraction of the minimum of $2.95 billion in loans of $150,000 or more linked to entities with insurance-related North American Industry Classification System, or NAICS, codes in the SBA data, which also include agencies, claims adjusters and third-party administrators. Net borrowings of any magnitude by entities deemed by the SBA to have "finance and insurance" NAICS codes totaled nearly $12.21 billion.
But although the carriers' borrowings are small in a relative sense for a program through which $521.48 billion had been funded net of cancellations through June 30, they may be individually significant. The vast majority of carriers involved had zero borrowed money as of March 31, and many are organized as mutuals, risk-retention groups and fraternal benefit societies — entities that may be limited by their form of organization in the ways in which they can raise capital.
PPP loans bear interest at a rate of 1% and may be forgiven to the extent the borrower meets certain criteria around employee retention and salary levels. The program is intended to provide employers with funds sufficient to cover various categories of expenditure, including payroll, employee benefits, mortgage interest, insurance premiums, rent and utility costs.
Approximately 35.9% of the carrier borrowers had loans of between $150,000 and $350,000; 38.7% had between $350,000 and $1 million; 11.3% had between $1 million and $2 million; 7.7% had between $2 million and $5 million; and the remaining 6.3% had between $5 million and $10 million.
The average net admitted assets for those carrier borrowers for which March 31 financials are available is $191.1 million. Five had assets in excess of $1 billion: LifeCare Assurance Co., MCIC Vermont (A Reciprocal Risk Retention Group), Funeral Directors Life Insurance Co., Texas Life Insurance Co. and CompSource Mutual Insurance Co. The latter entity, an Oklahoma City-based workers' compensation writer, was the largest participant among insurance carriers based on March 31 policyholders' surplus, and it was one of nine carrier borrowers with loans of between $5 million and $10 million in size.
Other insurance carriers with loans of between $5 million and $10 million, according to SBA data, were ACCC Insurance Co., American Transit Insurance Co., Lancer Insurance Co., Oklahoma Farm Bureau Mutual Insurance Co. Inc., Pharmacists Mutual Insurance Co., Safe Auto Insurance Co., SFM Mutual Insurance Co. and Universal Insurance Co. (PR). Guaynabo, P.R.-based Universal said it received a loan for $8.6 million that it expects to be "substantially forgiven," according to its most recent quarterly statement.
Select other carriers made similar prognostications, including American Transit regarding its $7.5 million loan; Amalgamated Casualty Insurance Co. regarding its $397,810 loan; and American Mutual Share Insurance Corp. regarding its $508,382 loan.
Statement of Statutory Accounting Principles No. 15 requires that insurers account for gains from the extinguishment of debt, other than obligations to stockholders, as a realized capital gain.