Amica Mutual Insurance Co. expects its net underwriting loss to narrow significantly in 2018 after the impact of natural catastrophes on the homeowners business led to disappointing 2017 results.
The Lincoln, R.I.-based company reported a net underwriting loss of $91.9 million in 2017, compared with losses of $53.8 million in 2016 and $106.4 million in 2015. Its combined ratio widened to 109.8% from 109.1% in 2016. It had budgeted a combined ratio of 102.9% for the year.
Amica Mutual projected in the management's discussion and analysis section of its 2017 annual statement that the combined ratio for it and Amica Property & Casualty Insurance Co. would improve to 101.8% in 2018.
"Despite the difficulties of the past two years, the company has been able to lean on its strong capitalization and conservative investment philosophy to remain profitable," Amica Mutual said in the filing in reference to the $82.7 million in net income produced in 2017. The three consecutive years of underwriting losses are unprecedented in recent times for the company, which only once posted such a result in consecutive years between 1996 and 2014.
"Forecast results for 2018 are expected to improve," Amica Mutual added, "with anticipated rate increases becoming effective and a more normalized level of claims activity anticipated, but expense levels remaining mostly level."
Net losses incurred of $1.51 billion marked an increase from $1.35 billion in 2016. The loss ratio climbed to 69.3% from 67.3%. Improvement in Amica Mutual's auto loss ratio of 2.7 percentage points to 72.3% was more than offset by a deterioration of 10.1 percentage points in its homeowners loss ratio, which increased to 70.2%.
For the still-elevated auto loss ratio, the company cited a combination of factors such as a rise in distracted driving and an increase in the number of cars on the road in addition to higher losses in comprehensive coverage owing to the effects of Hurricane Harvey and spring 2017 hail storms in Texas. The auto loss ratio, excluding the impact of catastrophes, declined 6.2 percentage points year over year, the company said. It was one of a number of auto insurers that suffered from elevated claims severity in 2016.
In homeowners, Amica Mutual reported $242.5 million in catastrophe losses, of which $166.4 million resulted from hurricanes Harvey and Irma, Texas hail storms, California wildfires, and Northeast windstorms. Its catastrophe losses in the homeowners line totaled $135.1 million in 2016.
Growth in premiums earned of 8.5% across business lines helped the company partially mitigate the effects of higher incurred losses from loss and combined ratio perspectives. A combination of growth in policies-in-force of 2.9%, retention rates well in excess of 93% on auto and home business, and rate increases factored in the company's top-line expansion.
At the group level, based on 2016 direct premiums written, Amica Mutual ranked as the 22nd-largest U.S. personal lines insurer.
