Mutual insurers returned nearly $13 billion in premiums through 2020 in response to policyholders’ COVID-19-related challenges, and the sector ran at an underwriting loss as a result. Still, the growth in net earned premium generally helped offset those losses, according to a new report from The National Association of Mutual Insurance Companies and Aon.

“The biggest takeaway from this new report is the enduring success of the mutual model and the value of the long-term approach that is the foundation of the mutual industry,” Neil Alldredge, NAMIC president and CEO, said in prepared remarks.

The NAMIC/Aon report findings echo similar data points from a recent AM Best report, which found that U.S. P/C Mutual Insurers still saw premium growth despite 2020 pandemic givebacks.

The NAMIC/Aon report found that mutual insurers returned nearly $6.1 billion through policyholder dividends, while stocks returned $6.8 billion mostly through premium credits. As a result, by Q2 2021, the policyholder dividend ratio for mutual insurers reached normal, pre-pandemic levels of around 1 percent, according to the report.

NAMIC/Aon said that stock insurers’ dividends remained flat through the pandemic as they used premium credits to return money to insureds.

Mutual insurers’ increased policyholder dividend ratios left them at an underwriting loss, with the combined ratio for mutual insurers at 100.3 as of Q2 2021. Stock companies, by contrast, had a 95.6 combined ratio over the same period and they operated at an underwriting profit as they focused on returns, the report noted.

Mutual insurers were able to offset the increase in losses and loss adjustments with a growth in net earned premium, which created a slightly lower loss and LAE ratio of 70.2 percent in 2020, versus 71 percent for 2019. Additionally, mutual insurers booked loss and loss adjustment expenses of 70.3 for 2020, versus 72.5 percent the year before. Stock companies came in at 70.1 percent for 2020, versus 70 percent in 2019, according to the report.

Other report highlights:

  • Mutual insurers generated a record $932 million in capital and surplus in 2020, 7.4 percent higher than the year before.
  • Mutual insurers grew by 8.3 percent in 2020, versus 6.7 percent for stock companies. The gains in surplus came from more unrealized capital gains and insurer income generated by stock market increases.
  • There were 26 companies upgraded by AM Best in the first half of 2021, of which 73 percent were mutual, and the rest, stock. Over the same period, 33 percent of the 15 downgrades came from mutual companies.
  • Mutual insurers are perceived as working better for agents than other companies, particularly on communications with agents and settling claims fairly.

The full NAMIC/Aon report, “Mutual Factor 2021: How Performance, Structure and Focus Set Mutual Insurance Companies Apart,” looked at nearly 30 performance metrics for mutual insurers compared to other insurer categories. It also analyzed performance metrics for the first two quarters of 2021 and included findings from a recent survey of independent agents.

Source: NAMIC/Aon