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Largest US private auto insurers see slower premium growth in Q2

Premium growth has slowed sharply among the biggest U.S. private auto insurance carriers, according to an S&P Global Market Intelligence analysis.

After ratcheting up premiums in 2016 and 2017 to make up for a spike in losses in 2014 and 2015, the nation's biggest auto insurers were less aggressive with increases over the last year. Year-over-year growth in premiums written across the industry dropped to 2.8% in the second quarter from 7.5% in the prior-year period.

Elyse Greenspan, an analyst for Wells Fargo, said there was a prolonged period during which most auto insurers were pushing rate increases to combat an elevated frequency trend. But that trend eased in late 2018 and early 2019 as companies reached their target margins.

"Now we're in a period when companies are pushing for less price and [are] in a growth mode," she said in an interview. "So, with less price in the system, you're seeing an impact on the level of premium growth."

Sandler O'Neill & Partners analyst Paul Newsome cited a more conservative approach from the carriers that were assuming claim frequency was not going to "fall forever."

"They had good years for frequency in 2017 and 2018, so I think some folks overshot their price increases, and now you're seeing some people pull those rates back," Newsome said in an interview.

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State Farm Mutual Automobile Insurance Co. retained its top spot in the industry with $10.14 billion in direct premiums written in the second quarter, but was down 3.6% compared to the same period in 2018.

Four other companies in the top 20 by premiums written saw declines year over year. Nationwide Mutual Insurance Co., ranked eighth, saw premiums fall 7.3%, National General Holdings Corp. recorded a 2.8% decline, Hartford Financial Services Group Inc.'s premiums dropped 2.3% and Liberty Mutual had a modest 0.6% decrease in auto premiums written.

Progressive Corp. continued its impressive growth streak, retaining its No. 3 position with $7.43 billion in direct premiums written. That represents a 12.9% increase over the same period last year, the biggest premium growth among the top 20 carriers by premiums written.

Newsome said Progressive has lived up to its name in bucking the trend of decreasing written premiums, catching and reacting to the change in claims frequency before other companies. He said while other companies were still raising rates, then decreasing them, Progressive had steadier rate filings.

"Insurance customers don't like change," Newsome said. "They're generally happy with modest changes, and Progressive was in that situation when other companies were not."

Auto-Owners Insurance Co. Inc. was the other carrier that saw a double-digit improvement. It reported a 10.5% increase over the same period in 2018, even as its direct incurred loss ratio plummeted year over year to 75.7% from 244.1%.

Berkshire Hathaway Inc.'s GEICO Corp. maintained its hold on the No. 2 spot as it saw premiums written rise 5.7% to $8.39 billion, though that growth rate was relatively weak compared with results in prior periods.