A look at the year end results for some of the major publicly-traded insurers in Massachusetts & New England
MAPFRE raises overall earnings by 45.3 percent to 765 million euros ($832 million) in 2021
North American Results
“In the North America Regional Area, premiums for 2021 stood at just over 2 billion euros ($2.2 billion), down by 1.2 percent. In local currency however, actual growth is close to 2 percent. Earnings from this regional area were up by 16.3 percent to 89 million euros ($97 million).
In the United States, business remained stable, with premium volume of more than 1.7 billion euros, ($1.85 billion), a result of both the depreciation of the dollar and the strict technical control measures implemented in recent years.
In Puerto Rico, premiums stood at 335 million euros ($365 million) (-5.5 percent) and earnings for the country exceeded 16 million euros ($17.4 million), compared to losses the previous year as a result of the earthquakes that occurred in the country.”
Key 2021 Fiscal Highlights (Global)
- Earnings would have stood at 703 million euros (+6.8 percent) discounting the extraordinary receipt from Bankia and the cost of operational restructuring.
- Group revenues are up by 7.2 percent, exceeding 27.3 billion euros, and premiums grow 8.2 percent to 22.2 billion euros.
- Diversification pays off: all the Group’s regional areas and business units contribute positively to earnings.
- Iberia, Brazil, North America and RE drive the growth in earnings results, while LATAM leads the increase in premiums.
- The impact of COVID-related claims amounts to 460 million euros in 2021, 79 percent of which are in LATAM.
- The Group’s ROE increases by almost 3 percentage points, reaching 9 percent at the end of 2021.
- The dividend returns to pre-pandemic levels, with 14.5 cents per share charged against the results for the 2021 financial year.
“We continue to invest in digital technology enhancements for our core systems and our Innovation Lab that are aimed at providing our independent agents and consumers with useful tools to reduce friction and enhance the user experience.”
Selected Remarks from George M. Murphy, President & CEO
“As we returned to a more normal operating environment after a record year in 2020, we are proud of our achievements in 2021. We continued our track record of operational excellence, posting a strong combined ratio of 93.0%. Our combined ratio compares favorably to the average of our Performance Peer Group, as defined on page 28 of our 2021 Proxy Statement, that have reported Fiscal Year 2021 results of 95.2% and is below our own five-year average of 93.9%. Our book value increased by 5.2% and reached a record high of $62.47 per share as of December 31, 2021.”
“We continue to invest in digital technology enhancements for our core systems and our Innovation Lab that are aimed at providing our independent agents and consumers with useful tools to reduce friction and enhance the user experience. These investments, along with our strong underwriting discipline, provide a strong foundation for growth in Safety’s book value and allow Safety to return capital to
its investors. Our dividend yield of 4.3% ranks in the top three of our Performance Peer Group and remains a priority of our Board and management team
Key 2021 Fiscal Highlights
- Net income for the quarter ended December 31, 2021, was $32.0 million, or $2.14 per diluted share compared to net income of $52.9 million, or $3.55 per diluted share, for the comparable 2020 period.
- Net income for the year ended December 31, 2021 was $130.7 million, or $8.80 per diluted share, compared to net income of $138.2 million, or $9.18 per diluted share, for the comparable 2020 period.
- Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the year ended December 31, 2021 were 59.6%, 33.4%, and 93.0%, respectively, compared to 52.5%, 34.6%, and 87.1%, respectively, for the comparable 2020 period.
- Direct written premiums for the year ended December 31, 2021 increased by $3.4 million, or 0.4%, to $802.1 million from $798.7 million for the comparable 2020 period.
- Net written premiums for the year ended December 31, 2021 increased by $1.0 million, or 0.1%, to $764.5 million from $763.5 million for the comparable 2020 period.
- Net investment income for the year ended December 31, 2021 increased by $3.1 million, or 7.5%, to $44.1 million from $41.0 million for the comparable 2020 period.
“Looking ahead to 2022 and beyond, we’ll continue to focus on these objectives and work to build upon the progress we’ve made to date.”
Selected Remarks from David Long, Chairman & CEO
“We had a strong finish to the year with net income attributable to LMHC of $722 million in the fourth quarter, contributing to record net income of $3.1 billion for the full year 2021,” said David H. Long, Liberty Mutual Chairman and CEO. “Results continued to benefit from the exceptional returns we’ve seen over the past year in our partnerships, LLC, and other equity method investment portfolio, which produced $916 million of pre-tax income in the quarter.
We also continued to make progress in the quarter against our objectives of profitable growth in Global Retail Markets, profit improvement in Global Risk Solutions, and expense management, with net written premium growth in GRM of 8.5%, core combined ratio improvement in GRS of 2.6 points to 91.3%, and a 0.6 point decrease in the group’s expense ratio to 29.6%. Looking ahead to 2022 and beyond, we’ll continue to focus on these objectives and work to build upon the progress we’ve made to date.”
Key 2021 Fiscal Highlights from Earnings Call
- Strong results in the fourth quarter capped off a record ending year for Liberty Mutual.
- Net income attributable to Liberty Mutual holding company for the quarter was $722 million, up $560 million year over year, bringing full-year earnings to $3.1 billion.
- Pre-Tax operating income before partnerships, LLC and other equity method income for the quarter was $352 million compared to a pre-tax loss of $33 million in the prior year quarter.
- Strong growth in U.S. personal lines with core auto and home as policy growth of 5.5%, which moderated slightly through the year and was relatively in line with prior year.
- In the U.S., homeowners and private passenger auto premium increased by 18.5% and 7.3% respectively driven by solid retention and higher home insured values and rate increases taken to offset rising personal lines severity trends.
- U.S. business lines net written premium was up slightly over of a prior quarter, driven by higher average written premium attributable to growth and exposures.
- Auto loss trends and U.S. personal lines are elevated, driven by increases in used car prices that impact the claims costs of vehicles that are a total loss and elevated parts prices, pressuring repairable claims severities. Bodily injury severity remained elevated as higher average speeds and fatality rates combined with increased uninsured and underinsured motorist activity pressured loss trends.
- Combined ratio in the quarter was 96.7% up 5.3 from the prior year quarter. The core combined ratio was up 1.8 points to 94.1% with 4 points primarily from personalized loss ratio deterioration driven by the loss trends I mentioned as well as an increase in economic activity year over year. The expense ratio was 2.2 points better driven by earned premium growth and favorable personnel expense driven by lower staffing levels
“We begin 2022 competitively positioned with strong momentum and a winning formula to consistently produce superior risk-adjusted returns .”
Selected Remarks from Chairman and CEO Christopher Swift
“In 2021, The Hartford delivered strong financial performance with meaningful growth and P&C margin expansion driven by stellar results in Commercial Lines and a significant contribution from partnership investment returns. In Group Benefits, solid premium growth and underlying results were offset by pandemic related excess mortality.”
“We begin 2022 competitively positioned with strong momentum and a winning formula to consistently produce superior risk-adjusted returns. Our businesses complement each other extremely well and together represent a unique portfolio with distinctive advantages. Continued execution on our strategic priorities will drive profitable growth, enable market-leading ROEs, deliver consistent capital generation and sustain our top quartile ESG performance all of which will maximize value creation for stakeholders.”
Selected Remarks from President Doug Elliot
“Our P&C underlying results for the year were excellent with margin expansion across Commercial Lines driven by strong earned pricing and underwriting execution. Commercial Lines written premium exceeded $10 billion, up 12 percent for the year, while Small Commercial eclipsed $4 billion for the first time. New business levels were impressive, and retention held steady.
Commercial Lines’ fourth quarter renewal written pricing, excluding workers’ compensation, held constant with the third quarter at 8 percent. In Personal Lines, we delivered strong 2021 operating results and are encouraged by improved auto insurance shopping and the roll-out of our new auto and home product. Across P&C, the performance was outstanding, and the results are a strong validation of our execution roadmap.”
Key 2021 Fiscal Highlights
- Fourth quarter 2021 net income available to common stockholders of $724 million ($2.10 per diluted share) increased 36% from 2020, and core earnings* of $697 million (core earnings per diluted share* of $2.02) were up 10% from the prior year.
- Full year 2021 net income available to common stockholders of $2.3 billion ($6.62 per diluted share) increased 37% from 2020, and core earnings of $2.2 billion ($6.15 per diluted share) were up 4% from the prior year.
- Property & Casualty (P&C) net premiums written rose 11% in fourth quarter 2021 and 9% in the full year driven by Commercial Lines premium growth of 14% in the quarter and 12% in the full year.
- Commercial Lines fourth quarter combined ratio of 84.6 improved 7.2 points and the underlying combined ratio* of 88.9 improved 1.8 points compared with the prior year. Full year 2021 combined ratio of 95.8 improved 4.6 points and the underlying combined ratio of 89.1 improved 6.4 points from the prior year.
- Group Benefits net income margin was 2.6% in fourth quarter 2021 and the core earnings margin* was (0.8%). Full year net income margin was 3.9% and the core earnings margin* was 2.5%. Both the net income margin and core earnings margin included excess mortality and COVID-19 related short-term-disability impacts with the impact on the core earnings margin of 8.6 points in the quarter and 7.8 points for the full year.
- Achieved net income ROE for the trailing 12 months of 13.1% and core earnings ROE* for the same period of 12.7%
- During the quarter, The Hartford returned $620 million to shareholders, including $500 million of shares repurchased and $120 million in common stockholder dividends paid. For the year, The Hartford returned approximately $2.2 billion to shareholders, consisting of $1.7 billion of shares repurchased and $485 million in common stockholder dividends paid.
“We begin 2022 with a proven strategy and a talented, committed team, eager to build on our unique competitive advantage and position us for even greater success.”
Selected Remarks from John C. Roche, president and chief executive officer
“2021 was an exceptional year for our company, as we enhanced our competitive position, continued our positive financial momentum and advanced our unique culture.”
“We delivered strong performance in the fourth quarter, with record operating earnings of $3.38 per diluted share, as well as net premiums written growth of 9.2%. Our performance in the quarter and the year underscores the effectiveness of our distinctive strategy, the relevancy of our product and service offerings, and the strength of our agency partnerships. At the same time, we made important progress across all of our businesses throughout the year.
In Personal Lines, our thoughtful pricing strategy, combined with continued strong performance, has positioned us to deliver sustained, profitable growth and value creation in the year ahead. In Commercial Lines, robust rate increases generated meaningful margin expansion, particularly in our specialty business, while our focus on innovative products and technology advancements continued to drive impressive growth.
Our ability to generate broad-based profitability, along with our superior underwriting and advanced data and analytics capabilities, proved to be more critical than ever in 2021, as we navigated extremely dynamic market conditions and challenges. We begin 2022 with a proven strategy and a talented, committed team, eager to build on our unique competitive advantage and position us for even greater success.”
Key 2021 Fiscal Highlights
- Net income for the full year 2021 was $418.7 million, or $11.49 per diluted share. This compares to net income of $358.7 million, or $9.42 per diluted share, in the prior year.
- Operating income was $318.3 million, or $8.73 per diluted share, in 2021, compared to operating income of $355.0 million, or $9.32 per diluted share, in the prior year.
- Catastrophe losses were $402.6 million, or 8.4 points of the combined ratio in 2021, compared to $286.7 million, or 6.3 points, in the prior year.
- The current accident year combined ratio, excluding catastrophe losses, was 89.8% in 2021, compared to 88.4% in 2020, driven by an increase in the current accident year loss and LAE ratio, primarily due to higher property severity and auto loss frequency, though loss frequency in auto remains below pre-pandemic levels.
- Total net premiums written were $5.0 billion in 2021, up 8.6% from 2020, including Commercial Lines growth of 9.2%, reflecting strong contributions from the specialty business, and Personal Lines growth of 7.7%.
- Commercial Lines operating income before taxes was $269.9 million in 2021, which included $227.3 million, or 8.0 points, of catastrophe losses, and $34.0 million, or 1.2 points, of net favorable prior-year reserve development.
- The Commercial Lines current accident year combined ratio, excluding catastrophe losses, was 90.8%, compared to 91.6% in the prior year, driven by an improvement in the current accident year loss and LAE ratio, which benefited from rate increases earning-in and a decrease in the expense ratio.
- Personal Lines operating income before taxes was $158.5 million, which included $175.3 million, or 9.1 points, of catastrophe losses, and $23.1 million, or 1.2 points, of net favorable prior-year reserve development. In 2020, Personal Lines operating income before taxes was $212.5 million, which included $154.5 million, or 8.4 points, of catastrophe losses, and immaterial favorable prior-year reserve development.
- The Personal Lines current accident year combined ratio, excluding catastrophes, increased to 88.3% from 84.0% in the prior year, driven primarily by an increase in the personal auto current accident year loss and LAE ratio from increasing severity and decelerating, but still favorable, loss frequency benefits. The company’s Personal Lines current accident year loss and LAE ratio remains below the pre-pandemic 2019 ratio by 2.1 points.
“Another year of exceptional performance is a testament to our franchise value, underwriting excellence and investment expertise.“
Selected Remarks from Alan Schnitzer, Chairman and Chief Executive Officer
“We are very pleased to report outstanding results for the fourth quarter and full year, including meaningful top line growth, strong margins and excellent returns from our investment portfolio. Another year of exceptional performance is a testament to our franchise value, underwriting excellence and investment expertise.”
“Core income for the quarter was $1.3 billion, or $5.20 per diluted share, generating core return on equity of 19.8%. These results were driven by strong underlying underwriting income and returns from our investment portfolio. Our
higher underlying underwriting income was driven by record net earned premiums of $8 billion and an excellent underlying combined ratio of 88.7%. For the full year, record underlying underwriting income of $2.3 billion after-tax contributed meaningfully to the 31% increase in core income to $3.5 billion, or $13.94 per diluted share.
Our high-quality investment portfolio generated after-tax net investment income of $2.5 billion for the year. Our impressive operating results, together with our strong balance sheet, enabled us to grow adjusted book value per share by
more than 10% during the year, after returning $3.1 billion of excess capital to shareholders, including $2.2 billion of share repurchases, and making important investments in our business.
“Our best-in-class marketplace execution enabled us to grow net written premiums by 10% this quarter to $8 billion, with each of our three segments contributing. In Business Insurance, net written premiums grew by 9%, with renewal premium change of 9.2% near an all-time high, while retention was higher than in the prior year quarter. In addition, new business was up 16% year over year. In Bond & Specialty Insurance, net written premiums increased by 13%, driven by renewal premium change of 10.9% and continued strong retention in our management liability business.
In Personal Insurance, net written premiums increased by 10%. Policies in force in both Auto and Homeowners increased to record levels, driven by continued strong retention and new business. Renewal premium change improved in Auto to 1.2% and remained strong in Homeowners at 8.7%.
“Our Perform and Transform call to action once again served us well in 2021. In addition to delivering excellent financial results today, we continue to leverage our scale and resources to execute on our ambitious innovation agenda for tomorrow.
We’re enriching 160 years of insurance expertise by investing in digital tools and virtual capabilities, deploying robotics and proprietary AI models, and hiring and developing top data scientists, engineers, roboticists and meteorologists, among others, to build the insurance company of the future. Looking forward, with the best talent in the industry, we remain well positioned to capitalize on opportunities and deliver industry leading returns.”
Key 2021 Fiscal Highlights
- Fourth Quarter 2021 Record Net Income per Diluted Share of $5.37 and Return on Equity of 18.6%
- Fourth Quarter 2021 Record Core Income per Diluted Share of $5.20 and Core Return on Equity of 19.8%
- Full Year Net Income of $3.662 billion, up 36%, and Return on Equity of 12.7%
- Full Year Core Income of $3.522 billion, up 31%, and Core Return on Equity of 13.7%
- Record fourth quarter net income of $1.333 billion and record core income of $1.289 billion.
- Consolidated combined ratio of 88.0% and underlying combined ratio of 88.7%.
- Net written premiums of $7.995 billion, up 10% compared to the prior year quarter; record full year net written premiums of $31.959 billion, up 7% compared to the prior year.
- Net written premium growth in all three segments compared to the prior year quarter; Business Insurance up 9%, Bond & Specialty Insurance up 13% and Personal Insurance up 10%.
- Total capital returned to shareholders of $1.017 billion, including $801 million of share repurchases; full year total capital returned to shareholders of $3.076 billion, including $2.200 billion of share repurchases.
- Book value per share of $119.77, up 4% from year-end 2020; adjusted book value per share of $109.76, up 10% from year-end 2020.
- Board of Directors declares regular quarterly cash dividend of $0.88 per share.
“In sum, we are in a period of strong wealth creation, and ’22 should be a good year in terms of growth and margin improvement.”
Selected Remarks from Evan G. Greenberg, Chairman and Chief Executive Officer
“With double-digit commercial premium growth and continued underwriting margin expansion, Chubb finished the year with record quarterly earnings and underwriting results, which contributed to one of the best years in our company’s history. Core operating income per share of $3.81 for the quarter was a record and up nearly 20%, with full-year net and core operating earnings of $8.54 billion and $5.57 billion, respectively, also records. Record underwriting results in the quarter included P&C underwriting income of $1.3 billion, up 31%, with a P&C combined ratio of 85.5%.
“P&C premiums in the quarter increased 9.6%, with commercial up 13% and consumer up over 2% as we continue to experience the impact of the pandemic. Commercial premiums increased 11% in North America and 15% in our international operations with strong contributions across our businesses. Commercial P&C rates increased 10.5% and 13%, respectively, in North America and Overseas General and we expect rates to continue to exceed loss costs for some time to come. In our international consumer lines, growth is slowly recovering and gaining momentum. For example, premiums in our international A&H division increased over 5.5% in constant dollars, the third consecutive quarter of growth and the best since the beginning of the pandemic.
“On the asset side of the balance sheet, adjusted net investment income topped $900 million for the quarter and contributed to a record $3.7 billion for the year. With the Fed finally accepting that inflation is a reality that is not going away, interest rates are rising and will continue to rise, and spreads should begin to widen, particularly if the Fed begins to shrink their balance sheet as they should. That will begin to benefit our fixed income investment portfolio, which has a four-year duration. Every 100 basis points of portfolio yield for us produces about $1.2 billion of additional investment income.
“As I look forward, beyond continued strong organic performance, we will benefit from greater revenue and earnings, in the short and long term, from the acquisition of Cigna’s Asia business and increased ownership of Huatai Group in China when approved by the regulator.
“In sum, we are in a period of strong wealth creation, and ’22 should be a good year in terms of growth and margin improvement.”
Key 2021 Fiscal Highlights
- Net income for the quarter ended December 31, 2021, of $2.14 billion, or $4.95 per share, and core operating income of $1.65 billion, or $3.81 per share.
- P&C combined ratio was 85.5% compared to 87.6% prior year, and the current accident year P&C combined ratio excluding catastrophe losses was 83.9% compared to 86.4% prior year.
- Book and tangible book value per share increased 1.7% and 2.7%, respectively, from September 30, 2021 and now stand at $139.99 and $94.38, respectively.
- Consolidated net premiums earned increased 9.8%.
- P&C net premiums earned increased 10.8%, comprising growth in commercial and consumer lines of 15.4% and 0.8%, respectively.
- Total pre-tax and after-tax P&C catastrophe losses were $2.40 billion (7.1 percentage points of the combined ratio) and $1.98 billion, respectively, compared with $3.26 billion (10.6 percentage points of the combined ratio) and $2.76 billion, respectively, last year.
- Total pre-tax and after-tax favorable prior period development were $926 million (2.8 percentage points of the combined ratio) and $756 million, respectively, compared with $395 million (1.2 percentage points of the combined ratio) and $357 million, respectively, last year.
- Record operating cash flow of $11.15 billion for the year.
- Total capital returned to shareholders for the year was $6.25 billion, including share repurchases of $4.86 billion, at an average purchase price of $175.85 per share, and dividends of $1.39 billion.
- North America Commercial P&C Insurance: The current accident year combined ratio excluding catastrophe losses decreased 2.4 percentage points, including a 1.5 percentage point decrease in the loss ratio and a 0.9 percentage point decrease in the expense ratio.
- North America Personal P&C Insurance: The current accident year combined ratio excluding catastrophe losses decreased 0.8 percentage points, including a 1.1 percentage point decrease in the loss ratio and a 0.3 percentage point increase in the expense ratio.
“Much of our huge value creation in insurance is attributable to Berkshire’s good luck in my 1986 hiring of Ajit Jain.“
Selected Remarks from Chairman of the Board Warren E. Buffett’s Letter to Shareholders
“…From an $8.6 million purchase of National Indemnity in 1967, Berkshire has become the world leader in insurance “float” – money we hold and can invest but that does not belong to us. Including a relatively small sum derived from life insurance, Berkshire’s total float has grown from $19 million when we entered the
insurance business to $147 billion.
So far, this float has cost us less than nothing. Though we have experienced a number of years when insurance losses combined with operating expenses exceeded premiums, overall we have earned a modest 55-year profit from the underwriting activities that generated our float.
Of equal importance, float is very sticky. Funds attributable to our insurance operations come and go daily, but their aggregate total is immune from precipitous decline. When it comes to investing float, we can therefore think long-term.
If you are not already familiar with the concept of float, I refer you to a long explanation on page A-5. To my surprise, our float increased $9 billion last year, a buildup of value that is important to Berkshire owners though is not reflected in our GAAP (“generally-accepted accounting principles”) presentation of earnings
and net worth.
Much of our huge value creation in insurance is attributable to Berkshire’s good luck in my 1986 hiring of Ajit Jain. We first met on a Saturday morning, and I quickly asked Ajit what his insurance experience had been. He replied, “None.”
I said, “Nobody’s perfect,” and hired him. That was my lucky day: Ajit actually was as perfect a choice as could have been made. Better yet, he continues to be – 35 years later.
One final thought about insurance: I believe that it is likely – but far from assured – that Berkshire’s float can be maintained without our incurring a long-term underwriting loss. I am certain, however, that there will be some years when we experience such losses, perhaps involving very large sums.
Berkshire is constructed to handle catastrophic events as no other insurer – and that priority will remain long after Charlie and I are gone.”
Key 2021 Fiscal Highlights from GEICO’s 10-K
- GEICO’s pre-tax underwriting earnings in 2021 and 2020 were significantly affected by changes in average claims frequencies.
- Beginning in the first quarter of 2020 and continuing through the first quarter of 2021, average claims frequencies were significantly below historical levels from the effects of less driving by policyholders during the COVID-19 pandemic.
- These effects were partially offset by higher average claims severities and lower premiums earned from the GEICO Giveback program, which provided for a 15% premium credit to all voluntary auto and motorcycle new policies or policies renewing between April 8, 2020 and October 7, 2020.
- Starting in the second quarter of 2021, average claims frequencies began to increase as driving by policyholders increased. In addition, average property claims severities increased due to increases in used vehicle valuations.
- Premiums written in 2021 increased $3.5 billion (9.9%) compared to 2020, which included a reduction of approximately $2.9 billion attributable to the GEICO Giveback program.
- Premiums earned in 2021 increased $2.6 billion (7.4%) compared to 2020. The GEICO Giveback Program reduced earned premiums by approximately $2.5 billion in 2020 with the remainder of the impact included in 2021. Voluntary auto policies-in-force in 2021 were slightly higher compared to 2020.
- Losses and loss adjustment expenses increased $5.0 billion (19.1%) compared to 2020. GEICO’s ratio of losses and loss adjustment expenses to premiums earned (the “loss ratio”) increased 8.1 percentage points compared to 2020.
- The increase in the loss ratio reflected an increase in average claims frequencies and severities and higher losses from significant catastrophe events, partially offset by increased reductions of ultimate estimated losses for claims occurring in prior years.
- Claims frequencies in 2021 were higher for all coverages, including property damage and bodily injury (thirteen to fourteen percent range), personal injury (sixteen to seventeen percent range) and collision (twenty-one to twenty-two percent range).
- Average claims severities in 2021 were also higher for property damage coverage (two to three percent range), collision coverage (fifteen to sixteen percent range) and bodily injury coverage (eight to ten percent range). Ultimate claim loss estimates for claims occurring in prior years were reduced approximately $1.8 billion in 2021 and $253 million in 2020,
which produced corresponding reductions in losses and loss adjustment expenses.
- Losses incurred attributable to Hurricane Ida in 2021 were $375 million, while losses in 2020 included $81 million attributable to Hurricanes Laura and Sally and U.S. wildfires.
- Underwriting expenses decreased $199 million (3.5%) compared to 2020, reflecting lower advertising expenses. GEICO’s expense ratio (underwriting expenses to premiums earned) decreased 1.6 percentage points in 2021, reflecting lower nominal expenses and higher premiums earned.
“…Choosing the theme of flexibility for this year’s annual report aptly reflected 2021 and all of the twists and turns we navigated during the year.”
Selected Remarks from President and Chief Executive Officer Tricia Griffith’s Shareholder Letter
“The first quarter of 2021 was relatively calm as we were still enjoying strong margins reporting a combined ratio (CR) of 89.3, even given the fact that during 2020 we had lowered our personal auto rates in 40 states producing estimated average savings for our customers of $800 million. April 2021 was the first month where we posted a 96 CR, and we were beginning to see developments that turned out not to be temporary. Fast forward to the end of the quarter where we reported a 100.5 CR for the month of June and 96.5 for the second quarter 2021, versus an 87.7 in the same period the prior year. For the year, we reported a 95.3 CR and fulfilled our publicly stated financial goal of making at least 4 cents of aggregate underwriting profit in any given calendar year. Hitting our goal did not come without some challenges (reducing our marketing spend) and hard work on the part of many within the company…”
Key 2021 Fiscal Highlights
“Across our Personal Lines organization, we added more than 1.3 million policies, ending 2021 with 22.7 million Personal Lines policies in force. We grew our Personal Lines net premiums written (NPW) and net premiums earned by nearly $3 billion, crossing the $36 billion NPW milestone to end the year at a stunning $36.2 billion. While new applications will likely be more of a challenge as we increase rates, we believe we will be well positioned when the industry catches up with trends…”
“A big congratulations goes to the entire Commercial Lines organization for a terrific year. The Commercial Lines business reached $8.0 billion in NPW, achieving 51% growth at an 88.9 CR in 2021, in large part due to growth in our commercial auto business. Not only have we achieved profitable double-digit premium growth for the 7th consecutive year, but our 2021 premium growth alone equates to almost the size of the #2 commercial auto insurer based on 2020 statutory results…”
“I’m pleased with our progress and expect continued positive momentum in 2022 and beyond.”
Selected Remarks from Heritage CEO Ernie Garateix
“As expected, we are beginning to see the initial benefits of the strategic initiatives we launched in 2021, as we focus on meaningful rate increases, re-underwriting existing business, selectively accepting new business, optimizing our distribution network, enhancing the agent experience and improving expense management.”
“The result of those actions was solid underwriting performance in the fourth quarter, as weather losses normalized and year-over-year, the attritional loss ratio, which excludes current accident quarter weather losses and prior year development, improved by over 4 points. We also continued to execute our diversification strategy, with significant opportunities for future growth in geographies where we already have meaningful and proven distribution partnerships. I’m pleased with our progress and expect continued positive momentum in 2022 and beyond.”
Key 2021 Fiscal Highlights
- Fourth quarter net loss of $49.2 million or $(1.79) per share, down from $2.8 million or $0.10 per diluted share in the prior year quarter, with the reduction stemming from a $60.5 million ($2.20 per share) non-cash, mostly non-deductible, goodwill impairment charge.
- Fourth quarter non-GAAP adjusted net income** of $11.3 million or $0.41 per diluted share, up from $2.8 million or $0.10 per diluted in the prior year quarter, with the improvement stemming from stronger underwriting profitability.
- Net combined ratio of 93.2%, improving from 108.7% in fourth quarter 2020 to its lowest level in two years.
- Net loss ratio of 61.9%, improving 8.5 points from the prior year quarter, as both attritional and net current accident quarter weather losses improved.
- Net expense ratio of 31.3%, down 7.0 points from the prior year quarter.
- Premiums-in-force of $1.2 billion, up 8.3% year-over-year, with the increase primarily stemming from rate increases, while a 1.7% decline in policies-in-force over the same period reflected Heritage’s selective underwriting.
- Gross premiums earned of $293.7 million, up 10.7% from $265.4 million in the prior year quarter, reflecting higher gross premiums written over the last twelve months.
- Gross premiums written of $278.8 million, down 1.2% from the prior year quarter, as intentional exposure-management and re-underwriting efforts resulted in a 17.8% reduction in Florida, largely offset by growth in other regions.
- Continued execution of Heritage’s diversification strategy, as Florida accounted for just 26.9% of overall total insured value, down from 31.3% as of year-end 2020.