The analysis also points to continued to sophistication in how property risks are priced. homeowners. “This is particularly true regarding the ongoing development and expansion of by-peril pricing modules and more granular pricing metrics across this line of business,” says A.M. Best.

The analysis notes that as of the 2012 third quarter, personal-lines insurers had been reporting “considerable improvement” in results due to a lack of catastrophe losses relative to 2011. “However,” the ratings agency says, “with Superstorm Sandy making landfall in the fourth quarter, the potential for a ‘below-average’ catastrophe loss year was quickly erased.”

Despite the more frequent and severe weather events, A.M. Best says the personal-lines segment remains adequately capitalized, and the ratings agency attributes that mainly to results in the auto line. The ratings agency says it expects auto to continue to produce results similar to the past several years.

“Pricing sophistication continues to evolve, particularly through telematics...,” says A.M. Best.

The analysis adds, “Another trend, multi-channel distribution – interaction with potential and existing customers across a wide spectrum of distribution outlets – remains a key differentiating factor for a large portion of the personal-auto market. In addition, brand awareness programs and marketing budgets are expected to continue growing at the current pace.”

The line does have its challenges though. A.M. Best notes that while loss-cost trends “remain generally moderate,” there is some pressure from rising medical and auto-repair costs. “In addition, Sandy’s effect on the automobile line was somewhat higher than anticipated, which may drive movement to additional risk-management attention on auto’s exposure to catastrophe loss,” states the analysis.

A.M. Best says its stable outlook implies that most rating actions in 2013 will be affirmations and that the number of positive rating actions will keep pace with negative rating actions.