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Auto physical damage losses remained under pressure in Q3

The 10 largest insurers of auto physical damage, based on direct premiums written, saw their direct incurred loss ratios rise year over year in the third quarter, according to SNL data.

State Farm Mutual Automobile Insurance Co., United Services Automobile Association and Liberty Mutual Holding Co. Inc. logged significant increases during the period. Among the top 10 writers, direct incurred loss ratios ranged from 58.23% for Travelers Cos. Inc. to 83.72% for USAA. The auto physical damage line as reported in quarterly statements does not distinguish between commercial auto and private-passenger auto business.

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The direct incurred loss ratio for the line across the entire industry stood at its highest third-quarter level in at least 15 years. Over the past decade, the second-highest direct incurred loss ratio for the third quarter of any year was 65.69%. That figure was reported back in the third quarter of 2011 and was primarily due to the impacts of Hurricane Irene.

The group led by State Farm saw its direct incurred loss ratio increase to 78.72% in the third quarter from 68.56% in the prior-year quarter. The quarterly loss ratio in that line was the group's highest since the three-month period ended June 30, 2012, according to an S&P Global Market Intelligence report.

GEICO Corp.'s direct incurred loss ratio increased to 72.80% in the third quarter from 67% a year ago. The Berkshire Hathaway Inc. unit's third-quarter statutory statements showed that its auto physical damage direct losses incurred soared 22.5% year over year to $1.79 billion.

Allstate Corp.'s direct incurred loss ratio in the auto physical damage line increased to 59.27% in the third quarter from 53.02% a year ago. According to a Form 10-Q, auto loss ratio for the Allstate brand increased 0.1 point in the third quarter, compared to the same period of 2015, due to increased catastrophe losses, which were higher than historical averages, and rising loss costs, partially offset by increased premiums earned. The company reported catastrophe losses of $481 million in the third quarter, versus $270 million in the year-earlier period.

At Progressive Corp., the direct auto physical damage loss ratio increased to 71.57% in the third quarter from 65.63% a year earlier. The company in a Form 10-Q said catastrophe losses were $158.7 million in the third quarter, up sharply from $37.7 million in the third quarter of 2015. Progressive estimated catastrophe losses of about $85 million as of Oct. 31 resulting from Hurricane Matthew, of which about $40 million were in the vehicle businesses.

Travelers reported a direct incurred loss ratio of 58.23% in the third quarter, the lowest among that of the top 10 auto physical damage insurers. Underwriting results for the most recent quarter reflected lower net favorable prior-year reserve development, higher non-catastrophe weather-related losses and higher-than-expected losses associated with auto bodily injury, CEO Alan Schnitzer said in a statement. Catastrophe losses in the third quarter were $89 million and primarily resulted from hail storms in the Western part of the U.S. and flooding in the Southeast region of the U.S., the company said in a Form 10-Q.

Among the top 30 auto physical damage insurers, Southern Farm Bureau Casualty Insurance Group posted the highest year-over-year increase in its direct incurred loss ratio; Cincinnati Financial Corp. logged the most significant year-over-year decrease. Louisiana Farm Bureau Casualty Insurance Co., which would have had a lot of exposure to the Louisiana floods in August, contributed to the majority of the increase in losses at Southern Farm Bureau.

The 10 largest auto physical damage insurers based on direct premiums written took the same spots in the third quarter as in the prior-year quarter. The top five companies accounted for nearly 50% of direct premiums written for auto physical damage policies for the three months ended Sept. 30, while the top 30 made up 83% of the industry. State Farm was the largest writer of the business with $4.10 billion of direct premiums written, representing 17% of the industry total. GEICO took the second spot after reporting growth of more than 14% in direct premiums written.

For the industry, aggregate direct premiums written for auto physical damage policies rose 7.18% year over year in the third quarter to $24.38 billion, compared to 7.58% year-over-year growth in the prior-year quarter. All of the top 30 industry players, except The Hartford Financial Services Group Inc. grew their auto physical damage insurance business in the third quarter, with nine reporting growth rates in excess of 10%.

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SNL offers a variety of tools to analyze underwriting performance of insurance companies. Click here for a template to review quarterly underwriting information for insurance companies.

Quarterly underwriting information by line of business is available in Parts 1 and 2 of the NAIC quarterly statements filed by U.S. insurance subsidiaries. This information is also available in the U.S. Insurance Statutory Financials database in SNLxl.