Personal lines-focused insurers saw their underwriting performance improve year over year in the third quarter of 2023 as pricing picked up, particularly in the personal auto space, and catastrophe losses decreased.
An aggregation of results for insurance subsidiaries that write at least 70% of their direct premiums within personal lines — personal auto, homeowners and farmowners — showed that their net combined ratio improved 4.1 percentage points, dropping to 108% in the third quarter of 2023 from 112.1% in the prior-year period, according to a review of quarterly regulatory statements.
However, when compared to commercial-focused companies, personal insurers continue to underperform. US commercial lines insurers posted underwriting profitability as their combined ratio came in at 97% in the third quarter of 2023, about 11 percentage points lower than personal lines insurers.
GEICO, USAA saw double-digit improvement
Among the largest US personal lines-focused insurers, Berkshire Hathaway Inc.'s Geico Corp. posted the largest year-over-year combined ratio improvement. Geico's net combined ratio plunged to 90.2% during the quarter, a decline of 20 percentage points from a year earlier.
The improvement was primarily due to an 18.9 percentage points decline in the loss and loss adjustment expense ratio, which Geico said was the result of higher average premiums per auto policy, increased favorable development of prior-year claims estimates and lower frequency. Rate increases, as well as a reduction in advertising expenses incurred, slashed the insurer's expense ratio. It dropped to 9.1% from 10.2% in the third quarter of 2022.
United Services Automobile Association was the only other insurer that saw a double-digit year-over-year improvement in its combined ratio at 18.1 percentage points. The Texas-based insurer's combined ratio decreased from 117.9% in the prior-year period to 99.8% in the third quarter of 2023. That was the first time since the second quarter of 2021 its combined ratio was under 100%.
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The Allstate Corp.'s combined ratio dropped to 103.8% in the third quarter, down 8.6 percentage points from the prior-year quarter, despite a roughly $400 million increase in catastrophe losses. Catastrophe losses for the first nine months of 2023 came in at $5.57 billion, the highest level for the period in the company's history, compared with $2.33 billion in the year-ago period.
Allstate's auto business posted better results in part due to rate increases. Higher premiums earned, lower adverse prior-year reserve reestimates and expense efficiencies were the other factors highlighted in an earnings call.
The Progressive Corp. saw a nearly 20% year-over-year growth in net premiums earned, the largest among the leading personal lines insurers. Substantial premium rate increases, and a larger number of policies in-force have contributed to its premiums growth.
Progressive, which was hit hard by Hurricane Ian in 2022, saw a 47% year-over-year decrease in catastrophe losses in the third quarter of 2023. Overall, the insurer's net combined ratio of 92.2% was the lowest since it posted a ratio of 88.5% during the first quarter of 2021.
State Farm Automobile Co. reported the largest increase in net losses incurred in the most-recent quarter. Its net combined ratio of 121.7% was the worst among its peers. It marked an improvement of 0.7 percentage points from the prior-year period, but a deterioration of five percentage points from the second quarter of 2023. The world's largest property and casualty insurer is on pace for its worst homeowners direct incurred loss ratio in more than two decades even as its private auto ratio shows signs of improvement.
Farmers Insurance Group of Cos. was the only personal insurer that did not see a year-over-year improvement in its combined ratio, which came in at 106.3%.
