The 2024 annual statutory raw data came out over the weekend. What follows is our first analysis of this data in easy-to-read tabular and graphical formats, which we have used to discern segmental and yearly trends.
The figures shown in our analysis reveal that the industry moved to an overall underwriting profit. This favorable outcome was driven by an improvement in personal auto and homeowner’s insurance, partially offset by worsening other liability, product liability, and medical malpractice business.
However, these results do not endorse the industry's ability to navigate its way out of a challenging reserving environment. Our view has consistently remained that we are not yet at the inflection point on loss trends, as other liability trends keep on worsening while being offset by workers' compensation reserve releases.
Adding to these worries for both the soft market and hard market years is the surprising result in commercial auto. Yes, commercial auto is a mix of monoline and package, but some carriers have continued to point to a worsening of trends, so we would not be surprised if results deteriorate over 2025.
We view these results as transitory as the industry continues to take the reserve addition medicine in smaller doses than recommended and continues to offset this with workers' compensation releases.
Below, we discuss these in greater detail, starting with loss ratios for different sub-segments over the past five years.
Overall, short-tail lines, such as personal auto and homeowners’ loss ratios, improved sequentially for 2024. On the other hand, long-tail lines, such as other liability loss ratios, jumped materially by 6.8 pts, while workers' compensation remained flat.
The table below shows several relevant income statement items for the P&C industry.
The industry had its best combined ratio in the four-year period we observed of 97.5% and an underwriting profit for 2024 following underwriting losses from 2021-2023.
The industry's top-line growth accelerated, with net written premiums up 9%. However, the industry loss and loss adjustment expense ratio fell by more than 5 pts to 71% vs 76.3% in 2023.
Below, we delve deeper into the divergence by lines over time. Over the past year, there has been a considerable debate on the quality of business written in the so-called hard market years.
On the commercial lines side, other liability, medical professional liability, and product liability loss ratios worsened in 2024 compared to 2023.
However, private auto and homeowners improved by nearly 10 pts, more than offsetting the worsening in commercial lines, which led to an overall improvement in the loss ratio of almost 5 pts.
(Note, loss ratios in the chart below and all of the following line-specific charts exclude LAE as this is not available by line of business.)
Digging into the carrier-level data, the chart below highlights the top P&C insurers ranked through year-end 2024 in direct written premiums and five years of combined ratios.
On a carrier level, the results of personal auto-predominant insurers were also materially better than those of the commercial-predominant insurers shown below. Additionally, some have continued to tweak loss picks ahead of their peers on changing loss-cost inflation expectations. This can have the effect of worsening their combined ratios near-term but reduces the chance of adverse development down the road.
Commercial lines
In our GAAP reserve piece published last week, we discussed the impact of soft market and hard market reserve buckets as well as the phenomenon of general liability (other liability) results continuing to reflect this corrective action.
The table below shows several carriers’ loss ratios for the other liability segment are ticking up, either due to adverse development or a higher loss pick.
Commercial auto is once again back in focus, with some carriers continuing to point to social inflation’s impact in this segment while pursuing rate increases. This segment includes both package underwriters as well as commercial auto writers whose results generally differ. Many of these carriers can also offer both products depending on product segmentation.
This past earnings season, several writers, including CNA, American Financial, and The Hartford, have either taken reserving action or adjusted their loss ratios. We discussed commercial auto trends and the differences between monoline and package underwriting in October.
On the other hand, Progressive, one of the largest monoline commercial auto writers, already took material corrective action in 2022 and 2023, resulting in a material sequential improvement in loss ratios. Was Progressive early and others late? As we have seen in the past, Progressive does tend to react earlier than the rest of the market so results could continue to worsen for its peer group.
However, due to a combination of Progressive’s large market share and the likelihood that not all writers have responded fully to the worsening loss cost environment, overall results improved by 2 points to 72% for 2024.
We continue to believe that this will be a line to watch in 2025, particularly due to its considerable (11.4%) growth in 2024.
The table below illustrates workers’ compensation performance. Although overall performance was stable, we note the uptick in many carriers’ performance, which continues to reflect a combination of ongoing pricing reductions and likely the lowest loss ratios expected at this stage of the market cycle.
Medical malpractice is another line that remains in focus as results have continued to worsen for several carriers. For 2024, loss ratios ticked up another 2.9 pts to 54% as this line also feels the pressure from social inflation and jury awards. Another factor in the worsening of trends is the migration of smaller physician service groups to larger hospitals, which have larger policies and therefore greater attorney involvement.
Personal Lines
After materially worsening for two years, with the industry caught unaware as loss cost trends worsened, personal lines continue to illustrate the positive impact of pricing and underwriting actions. The loss ratio fell another 10 pts to 65.8% in 2024 for personal auto.
A similar trend was observed for homeowners in 2024 as well, with loss ratios improving by 10 pts or so to 65.2%. We would note that the industry faces a significant loss from the California wildfires, and these numbers will likely look materially different in 2025.
