2012 Market Share. Insurers. The 2012 Texas premium and. in Texas. for

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1 By David Surles, CPCU, RPLU, AAI Contributing Author Insurers for Regina Anderson in Texas IIAT Manager of Technical Services The Texas premium and loss information tells a story of rising premiums and stability in company market share percentages and loss ratios. In last year s report, we commented on higher premiums in the commercial auto and workers compensation lines in compared to 2010 and attributed this fact to an improving economy and increased business activity. levels continued to rise in to levels not seen since 2008 for commercial auto and workers compensation. That s good news for Texas independent agents as well as companies. Texas is back in business! The good news for extended to include profitable loss ratios for all five lines reviewed for this report. The homeowners and commercial multiperil lines were especially notable with dramatic loss ratio percentage declines, following unprofitable loss ratios in due to bad weather and wildfires. These good results were not expected after Texas suffered losses totaling over $2.3 billion from major hail storms in Dallas-Fort Worth and McAllen. Here are the highlights in summary for : of Direct Writers & Agency Companies Texas Personal Lines Insurance Sales (Homeowners and Personal Auto) Agency Companies Direct Writers volume by year; dollar figures in millions $15,932 $4, % $16,112 $4, % $16,274 $4, % $16,637 $4, % $17,094 $4, % $18,018 $4, % $18,758 $4, % UNDERSTATED MARKET SHARE A.M. Best reports aggregate data for each company group and categorizes each company group as a Direct Writer or Agency based on the source of the majority of its premium volume. For example, premium for the following company groups are reported in the Direct Writer category even though a significant (but not majority) percentage of premium comes from independent agencies: Allstate, Auto Club AAA, Berkshire Hathaway, Farmers, Liberty Mutual, MetLife and Nationwide. This is offset somewhat by Progressive and Hartford, reported in the Agency category even though a percentage of those company group premiums come from non-independent agent sources or consumers. For this reason, the percentages of independent agency personal lines market share may be understated. The aggregate loss ratio for all Texas companies for all lines of business was 58.9 percent (a dramatic decrease from 63.5 percent in ), compared to the national aggregate loss ratio of 63.8 percent (down slightly from 64.9 percent in ). The Texas loss ratio was lower than the national average in personal auto, homeowners and workers compensation, but higher in commercial auto and commercial multiperil. Texas policyholders paid out $40.2 billion in premium for all lines of insurance (up from $38.3 billion in ), which is 8 percent of the national premium volume of $503.3 billion (up from $486.7 billion in ). Texas premiums grew at a faster pace than national premiums 5 percent in Texas compared to only 3.4 percent nationally. Personal lines market share for Texas independent agency companies in stayed exactly the same as at 26.9 percent. share for independent agency companies has remained virtually unchanged for 10 years, ranging from a low of 25.6 percent in 2008 to a high of 27.4 percent in 2004 and Of course, each percentage point represents about $200 million in premium lost to direct writer companies or gained by independent agency companies in any given year. $18,977 $4, % $19,632 $5, % $20,626 $5, % Compiled from Best DataBase Services. Experience by state for homeowners, private passenger auto liability, no-fault and physical damage. $11, % $11, % $11, % $12,150 73% $12, % $13, % $13, % $14, % $14, % $15, %

2 Personal Auto Personal Auto Homeowners Year $6, % 58.9% $6, % 75.5% 2010 $5, % 58.9% 2009 $5, % 59.9% 2008 $5, % 71.8% Homeowners Five-Year s Year $14, % 66.4% $13, % 67.3% 2010 $13, % 61.6% 2009 $13, % 64.3% 2008 $12, % 63.7% Direct Writers $10, % $9, % Agency Companies $4, % $3, % PERSONAL AUTO The top 20 companies in personal auto stayed exactly the same in. The top five companies State Farm, Farmers, Allstate, Progressive and USAA dominate personal auto with 59 percent of the market share. Independent agency companies lost a little ground against direct writer companies, with 28.4 percent in compared to 28.6 percent in. Independent agency companies wrote more personal auto premium in, just not as much more as the direct writer companies. The personal auto loss ratio of 65.6 percent was up from 63.4 percent in and only slightly lower than the national average loss ratio of 66.4 percent. Five-Year s Direct Writers $4, % $4, % Agency Companies $1, % $1, % Top 20 Personal Auto Carriers in Texas Top 20 Homeowners Carriers in Texas 1 State Farm 1 1, Allstate Farmers USAA Liberty Mutual Travelers Nationwide Farm Bureau American Strategic (ASI) Chubb Hartford Republic Auto Club (AAA) Amica Texas FAIR Plan MetLife NLASCO (National Lloyds) Universal Homeowners of America State National State Farm 1 2, Farmers 2 1, Allstate 3 1, Progressive 4 1, USAA 5 1, Berkshire Hathaway (GEICO) 6 1, Texas Farm Bureau Old American Nationwide Home State Liberty Mutual Titus Loya Republic Auto Club (AAA) ACCC Germania MetLife Kemper Amica

3 Commercial Multiperil Five-Year s Year $2, % 56.7% $2, % 62.8% 2010 $2, % 50.6% 2009 $2, % 45.5% 2008 $1, % 56.8% HOMEOWNERS The homeowners loss ratio, coming in at 54.4 percent, escaped virtually unscathed from the hail storms in Dallas-Fort Worth and McAllen. The loss ratio was down from 71.3 percent in, a year when Texas was wracked by major hail storms, tornados, freezing temperatures and wildfires. The rest of the country also remained relatively catastrophefree, contributing to a similar drop in the national average loss ratio from 75.5 percent in to 58.9 percent in. Homeowners of America entered the top 20 companies for the first time in, coming in at #19 and kicking State Auto out of the #20 spot. There were minor position changes within the top 20, with ASI and MetLife improving their positions to the detriment of Chubb and National Lloyds. The Texas Fair Plan Association maintained its position at #15 with a significant increase in premium from $58.6 million in to $72.2 million in. The market share for independent agency companies jumped for the second year in a row, from 23.1 percent in to 23.5 percent in. COMMERCIAL MULTIPERIL The commercial multiperil loss ratio of 61.3 percent was significantly lower than the loss ratio of 68.8 percent, reflecting fewer Texas catastrophe losses. This was one of two lines of insurance included in this report, however, that was higher than the national average loss ratio (56.7 percent). Commercial Auto Five-Year s Year $2, % 63.8% $2, % 59.6% 2010 $1, % 58.2% 2009 $1, % 53.2% 2008 $2, % 54.9% Top 20 Commercial Multiperil Carriers in Texas 1 Progressive Travelers AIG Liberty Mutual Zurich Nationwide Hallmark Old Republic Farmers State Farm Hartford Great American CNA W R Berkley Republic ACE INA Sentry Allstate Arch Home State Travelers Hartford Liberty Mutual Nationwide Farmers Zurich CNA Chubb Tokio Marine State Farm AIG Allstate Church Mutual QBE ACE INA Hanover W R Berkley Republic Cincinnati Guide One Top 20 Commercial Auto Carriers in Texas

4 Workers Compensation Five-Year s Year $2, % 67.9% $2, % 65.2% 2010 $1, % 68.3% 2009 $2, % 67.9% 2008 $2, % 62.9% The top 10 companies stayed exactly the same but several companies in the second tier of the top 20 changed positions in. The only new company in the top 20 was Guide One at #20, knocking Allianz out of the #20 spot. COMMERCIAL AUTO The commercial auto loss ratio suffered a significant increase in, from 58.4 percent in to 68.9 percent in. This was higher than the national average (63.8 percent). There was only one change in the top 20 companies, as Arch replaced State National at 18th place. Otherwise, the top 20 companies remained the same, albeit with several companies trading places, including Travelers bumping AIG from the #2 spot. WORKERS COMPENSATION Workers compensation premiums continued to recover in, with a 13.1 percent increase from following a 12.7 percent increase from 2010 to, reflecting continued improvement in business activity and employment. s had declined for five straight years prior to The workers compensation loss ratio of 47.7 percent was higher than the 43.3 percent in, but still remarkable when compared to the national loss ratio of 67.9 percent. Texas Mutual Insurance Co. continued to dominate the Texas market with 37.1 percent market share in, compared to 33.8 percent in. Texas Mutual managed to increase premium more than most companies with a 24.2 percent increase over. Three new companies entered the top 20 in, with Tower International Group, Berkshire Hathaway and Amerisafe replacing Arch, Republic and SeaBright. Top 20 Workers Compensation Carriers in Texas 1 Texas Mutual Liberty Mutual Travelers Zurich (20.3) 5 Hartford AIG ACE INA Service Lloyds CNA Chubb Old Republic Amerisure Fairfax Financial Accident Fund Farmers (21.2) 16 Tower W R Berkley Berkshire Hathaway Sentry Amerisafe WHERE THE DATA COMES FROM We are often asked the source of the data used for this annual market share report, because our information differs from the data available from other sources and from information provided by insurers to their staff and agents. Each year, an A.M. Best Co. subsidiary, Best Data Services, publishes the State/Line Report. The source data for this report is found on basic page 26 (statutory page 14) (Exhibit of s and es) of each insurer s sworn annual statement, prepared according to certain statutory requirements in a format dictated by the National Association of Insurance Commissioners, and filed with the Texas Department of Insurance. The resulting data differs from other sources because of the statutory nature of the report. and a tragic explosion in West. The final insurable losses from these catastrophes will probably not be enough to push property loss ratios back to the unprofitable level. With those events behind us, only a major hurricane along the Texas coast remains as a results-changing possibility. We can expect rising premium levels in all lines as the market slowly hardens and the business community continues its recovery from the economic conditions and unemployment that so adversely affected the premium levels in THE OUTLOOK FOR 2013 In 2013, Texas has been rocked by tornados and hail storms in north Texas, a $400 million hail storm in Amarillo, high winds and hail in central Texas

5 TOP 50 Top 50 Companies 1 State Farm 1 4, Farmers 2 2, Allstate 3 2, Liberty Mutual 4 1, USAA 6 1, AIG 5 1, Progressive 8 1, Travelers 7 1, Berkshire Hathaway 9 1, Nationwide 10 1, Texas Farm Bureau Texas Mutual Zurich Chubb CNA Hartford ACE INA Old American Home State Republic Germania Allianz Endurance W R Berkley Assurant QBE Titus Loya Great American FM Global Auto Club Old Republic Fairfax Kemper MetLife CUMIS XL America Philadelphia/Tokio Wells Fargo Amica ASI Hallmark Arch Hochheim Prairie Munich-American State Auto AmTrust Sentry Markel ACCC