With the largest companies individually taking no more than 3 or 4 percent shares of the market, even combined loss and expense ratio improvements like the 23 point drop reported by top-ranked Zurich American Insurance Company were no reflection of the underwriting state of affairs for commercial auto insurers overall.

While Schaumburg, Ill.-based Zurich Americans net combined loss and expense ratio was 98.4 for commercial auto, the industry's overall commercial auto net loss and expense ratio was 114.7 for 2,346 companies that reported premiums, losses and expenses, net of reinsurance, on the Insurance Expense Exhibits of their 2000 Annual Statements.

For the same set of companies, the comparable overall loss and expense ratio was 116.9 in 1999 and 114.1 in 1998.

Although the combined loss and expense ratio improved 2.2 points from 1999 to 2000, just the loss ratio piece of the combined ratio worsened slightly–coming in at 72.4 in 2000, compared to 71.7 in 1999.

And even that 0.7 point deterioration is a misleading result because of the overwhelming impact that a single company–Chicago-based CNAs Continental Casualty–has on the aggregate numbers. According to IEE data reported by Continental Casualty, the companys loss ratio dropped 73.4 points to 13.9 in 2000, net of reinsurance. (On a direct basis, Continental Casualtys loss ratio still improved, but only by 12.1 points to 78.5, according to the IEE data.)

Excluding Continental Casualty from the aggregate numbers, the overall loss ratio for the remaining companies worsened 3.8 points to 74.8 in 2000, compared to 71.0 in 1999.

Whether Continental Casualty is included in year-to-year comparisons or not, the trends apparent in liability and physical damage loss ratios remain the same–the overall physical damage loss ratio showed a marked improvement in 2000, while the overall liability loss ratio grew worse than it was in 1999.

Among the largest companies, Boston-based Liberty Mutual and Cincinnati Insurance Company in Ohio reported the worst overall commercial auto loss ratios. For Liberty Mutual, three years of data show three consecutive years of combined ratios over 140. In 2000, Libertys three-digit net loss ratio was nearly 108, according to IEE data, and its combined loss and expense ratio was 151.

While Liberty Mutuals 2000 loss ratio (107.5) was only 3.2 points worse than in 1999, at Cincinnati Insurance Company, a subsidiary of Cincinnati Financial Corp., a 108 loss ratio for 2000 represented a 29-point deterioration from 1999. In January, Cincinnati Financial Corp. announced that it had decided to put up fourth-quarter reserves of $110 million, adding 23 points to the groups overall combined ratio, in reaction to two Ohio Supreme Court decisions impacting uninsured motorists claims. (See NU, Feb. 5, page 26.)

Among the top 10 commercial auto writers, ranked by net written premium volume, Auto-Owners Insurance Company of Lansing, Mich., was the only company with a 2000 combined ratio that came in near break-even (at 103.3).

Among the top 50 writers, Southfield, Mich.-based Motors Insurance Corp. (at 90.3) and Balboa Insurance Company (at 93.4) reported the best net combined ratios for 2000. Both companies had net combined ratios under 100 for all three years included in the NU comparison.

Data Source: National Association of Insurance Commissioners, by permission. NAIC does not endorse conclusions based on its data. Data reported as of mid-June was compiled by Thomson Financial Insurance Solutions of Cambridge, Mass. National Underwriter developed the accompanying graph.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 3, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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