US workers' comp combined ratio worsened in 2023 despite premium growth

The combined ratio for the workers' compensation line of business in the US deteriorated slightly in 2023 even as premiums increased year over year, according to an S&P Global Market Intelligence analysis.

The workers' compensation combined ratio, which measures underwriting profit, increased to 84.9% from 84.5%, even as direct premiums written and net premiums written also grew, totaling $56.69 billion and $48.02 billion, respectively.

Although higher than the previous year, 2023's combined ratio still remained lower than the five-year peak of 88.1% in 2021.

The workers' compensation line of business has performed better in recent years in what has traditionally been a challenging industry, according to a report from S&P Global Market Intelligence.

"For 2024, there seems to be no stopping workers' comp from continuing its run of underwriting profitability for a 10th consecutive year short of an unexpected turn in the domestic economy, judicial environment or other underlying cost drivers," S&P Global Market Intelligence principal research analyst Tim Zawacki said in the report.

Travelers still on top

The top 20 writers of workers' comp business mostly saw premium increases in 2023, although for more than half of them the percentage increase was in the single digits. Only four saw their premiums rise by double digits, with the largest year-over-year change being Arch Capital, which reported premium growth of 14.6%.

The Travelers Cos. Inc. held on to its position as the top workers' comp insurer in the US, with its premiums written growing 1.6% year over year.

Paid medical severity changes was a subject Travelers CFO Dan Frey touched on during a fourth-quarter 2023 earnings call, describing them as higher than the "very benign pandemic levels."

"On the flip side of that, frequency has been pretty favorable and ... our view in reserving and in pricing still assumes that there's going to be a return to that higher longer-term trend," Frey said.

The top five largest US writers of direct premiums did not change from 2022 to 2023, but Berkshire Hathaway Inc. moved from seventh to sixth, pushing Liberty Mutual Holding Co. Inc. back a position.

In a Form 10K released in February, Berkshire Hathaway noted that workers' compensation claims reported losses were less than expected and, as a result, the company reduced estimated ultimate losses for prior years' loss events by $116 million.

Of the four insurers among the top 20 to see a decline in direct premiums written, Liberty experienced the largest decline, falling 9.5% year over year.

Accident Fund Holdings Inc., which had the second-largest decline of 4.5%, remained the eighth-largest underwriter.

State Insurance Fund Workers' Compensation Fund in New York, which was the ninth-largest workers' comp underwriter in 2022 with $1.57 billion in direct premiums written, was not included in the rankings as data for the company has currently not been publicly released.

Individual combined ratios

Of the top 20 workers' compensation insurers AmTrust Financial Services Inc. had the highest combined ratio of 93.1%. Meanwhile, Zurich posted the lowest combined ratio among the top 20 by a wide margin with 49.2%.