Driving Insurance Sector Performance: The Role of Premium Growth

Current Trends in Premium Growth

Current trends in premium growth show significant variations influenced by currency differences, balanced global growth in P&C segments, disciplined pricing in competitive markets, and strong top-line growth across businesses. Notably, auto premiums have seen a robust 12% increase, reflecting favorable market conditions.

"In particular, growth trends in net premiums written reported in U.S. dollars can differ significantly from those measured in original currencies." --- (AIG, sec filing, 2024/Q1)

"consumer up over 19%. P&C premium growth in the quarter again was balanced and broad based globally between areas of the globe and commercial versus consumer, reflecting favorable underwriting and market conditions overall." --- (CB, earning call, 2024/Q1)

"Fully insured ongoing premium growth of 2% reflects strong, but slightly lower persistency and a 6% decline in sales primarily driven by group life, where we are being disciplined with pricing and underwriting in this competitive marketplace." --- (HIG, earning call, 2024/Q1)

"Top line growth was strong across our market-leading set of businesses with adjusted premium fees and other revenues, or PFOs, totaling $12 billion, up 4% compared to the first quarter of 2023." --- (MET, earning call, 2024/Q1)

"I don't know, being up 12% in auto premium seems like a very good growth rate." --- (ALL, conference, 2024/06/05)

Key Drivers of Premium Growth

Premium growth in the insurance sector is driven by expanding core and voluntary product offerings, strategic investments, and gaining market share. Companies like MetLife and Allstate emphasize these factors, highlighting regional opportunities and methodical market share acquisition as key priorities for sustained growth.

"Adjusted premiums, fees and other revenues for the three months ended March 31, 2024 increased $281 million, or 5%, compared to the prior period, primarily driven by growth in both core and voluntary products." --- (MET, sec filing, 2024/Q1)

"We've been very successful in gaining share and driving share behind those investments, and we've been very methodical. There's lots of growth left in this business, lots of growth, attributed by some of the adjacencies that I talked about some of the regional opportunities that we still have left." --- (ALL, Investor Day, 2024/06/25)

"We're also focused on growing market share. Hopefully you heard that through every one of the presenters today around taking share as core to what we invest for every day and that's our key priority to get us to grow on an ongoing basis." --- (ALL, Investor Day, 2024/06/25)

Impact of Premium Growth on Profitability

Premium growth significantly impacts profitability, as evidenced by TRV's 8% new business increase and strong renewal premiums driving profitable growth. PGR's measures to accelerate profitable growth by lifting non-rate actions also highlight this link. Conversely, ALL's profitability actions led to a 30.8% premium decrease, showing potential negative impacts.

"New business remains strong and increased 8% from the prior year quarter. We're pleased with the impact that our production, product, and platform initiatives are having in the marketplace and building a high-quality mix of business and driving profitable growth in this market. In middle market, renewal premium change remains strong and consistent with recent levels at almost 10%." --- (TRV, earning call, 2024/Q2)

"While we continued to focus on profitability, during the first quarter 2024, we began taking measures that we believe will position ourselves to accelerate profitable growth during the year, including continuing to lift the non-rate actions we put in place during 2023 to slow new business growth and increasing our media spend." --- (PGR, sec filing, 2024/Q1)

"Commercial lines premiums written decreased 30.8% or $70 million in the first quarter of 2024 compared to the first quarter of 2023 due to profitability actions taken to no longer offer coverage to transportation network companies unless the contracts utilize telematics-based pricing and the Allstate brand exiting traditional commercial insurance in five states, which will continue to negatively impact premiums." --- (ALL, sec filing, 2024/Q1)

"Written premium growth was propelled by a 20% increase in our wholesale business with significant contributions from primary and excess casualty lines." --- (HIG, earning call, 2024/Q1)

"Auto renewal premium change will continue to gradually decline, reflecting the improved profitability on the line." --- (TRV, earning call, 2024/Q2)

Competitive Strategies for Premium Growth

Insurance companies are leveraging competitive advantages, rate increases, policy growth, enterprise-level product strategies, renewal price adjustments, and increased underwriting leverage to drive premium growth. These strategies collectively enhance their market position and optimize returns.

"In other words, our competitive advantages have enabled us to effectively execute a relatively low-risk growth strategy." --- (TRV, earning call, 2024/Q2)

"The increase in premiums collected were mostly driven by rate increases and policies in force growth." --- (PGR, sec filing, 2024/Q1)

"In summary, the shift to an enterprise level approach to product strategy represents a significant evolution in how we operate, allowing us to lean into our strengths, take advantage of our scale and growing capabilities and optimize our returns to achieve greater overall success.While relatively early days, we're excited by the progress we're already seeing and expect to see greater benefits into the future." --- (ALL, event transcript, Investor Day 2024/06/25)

"For Personal Lines, renewal written price increases represent the total change in premium per policy since the prior year on those policies that renewed and includes the combined effect of rate changes, amount of insurance and other changes in exposure." --- (HIG, sec filing, 2024/Q1)

"If I take comments on capital at the insurance companies with opportunities in property post the sale of Validus, it seems like AIG could meaningfully increase underwriting leverage here, which could obviously contribute to the 10% plus ROCE." --- (AIG, earning call, 2024/Q1)

Regulatory Influences on Premium Growth

Recent regulatory approvals have positively impacted premium earnings, as noted by Pat Callahan from Progressive. Allstate's methodical approach to new regulatory opportunities and the current regulatory momentum further highlight the significant influence of regulations on premium growth in the insurance sector.

"Pat Callahan: Yes, I would agree. On the regulatory side, there's certainly -- we've had a couple of recent approvals, and we're getting more comfortable with more of our calendar year premium earned in that margins continue to be where we expect them to be on -- in more and more of our states." --- (PGR, earning call, 2024/Q1)

"So it is a growth opportunity for us. I didn't cover it because it's not contemplated in this because we're going to be very methodical around as it legalizes, what are the regulatory rules around it and making sure that we're following all of those." --- (ALL, event transcript, 2024/06/25)

"unknown: Thank you. And I appreciate you haven't stated a specific allowance for new states in your $1,000,000,000 target, but can you talk to the current regulatory momentum in the U." --- (ALL, Investor Day, 2024/06/25)

Challenges and Risks in Premium Growth

Evaluating prior year development (PYD) and its impact on loss trends, accounting for premiums and loss reserves, and significant premium increases highlight the challenges in premium growth. These include profitability impacts, affordability issues, and customer retention risks, particularly for SMEs facing steep premium hikes.

"So every time we have an impact on PYD, we reevaluate, is that going to have an impact on current loss year, jump off point, or loss trend." --- (TRV, earning call, 2024/Q2)

"If the amount of premium paid by the ceding reinsurer is less than the related ceded loss reserves, the resulting gain is deferred and amortized over the settlement period of the reserves." --- (AIG, sec filing, 2024/Q1)

"Insurance agent: well let me check…Oh wow, that premium is about 3.5x last year!" --- (ALL, Twitter, 2024/07/14)

"40% increase for our business insurance. Another one of the death by 1000 cuts SME's in the UK experience." --- (CB, Twitter, 2024/07/04)

"Accident year loss ratio, as adjusted (Accident year loss ratio, ex-CAT) The loss ratio excluding catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting." --- (AIG, sec filing, 2024/Q1)

Technological Innovations and Premium Growth

Technological innovations, such as Allstate's cohesive enterprise tech stack and Progressive's usage-based insurance, enhance operational efficiency, market responsiveness, and product development. These advancements are pivotal in driving premium growth by enabling insurers to stay ahead of trends and deliver tailored products swiftly.

"Over the past few years, we've been consolidating our technology into a cohesive enterprise tech stack that provides increased visibility, enhances our agility and our efficiency and then delivers speed to market by allowing us to design for multiple channels at once." --- (ALL, event transcript, 2024/06/25)

"With that, we're always trying to stay ahead of the trends. So think of in the direct channel, think of usage-based insurance, all those things, even though they're -- they become actually a part of the product, they start with IT and our ability to have innovative technology." --- (PGR, earning call, 2024/Q1)