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United States Insurance Report
Q2 2011

  • Publication Date:February 2011
  • Publisher:Business Monitor
  • Product Type: Report
  • Pages:71

United States Insurance Report Q2 2011

The US insurance sector accounts for about a quarter of total premiums written by non-life and life companies worldwide. Approximately a third of all reinsurance sold worldwide is bought by US firms. Aside from its absolute size, it is relatively fragmented, even though a process of consolidation has been underway for some years. Companies such as State Farm (in the non-life segment) and MetLife (in the life segment) have powerful brands, access to economies of scale and several other advantages.

Mutuals make up a large minority position in the market. The success and size of companies such as New York Life and State Farm mean that some of the leading players do not need such access via listed markets and instead focus on delivering the benefits of mutual status to their policyholders/members. Foreign groups account for about an eighth of each of the non-life and the life segments. Zurich is the largest foreign player in the overall non-life segment, while ING, AEGON and John Hancock have top 10 positions in the overall life segment. The foreign groups present all have the economies of scale, within the US and in their businesses elsewhere, to compete.

Reinsurance is the main section of the market where foreign and (ultimately) foreign-owned companies have the edge. The Lloyd's market in London, leading Bermuda-based reinsurers such as XL and multinationals such as Swiss Re, Munich Re and Hanover Re, account for about 80% of the reinsurance premiums written annually in the US.

To build a picture of the US non-life segment that is consistent with those calculated for other countries, we use data provided by the Insurance Information Institute (III). We have added the net health insurance premiums identified by the American Council of Life Insurers (ACLI) in its annual statistical publications. Accordingly, we consider that non-life premiums rose from US$598.83bn in 2005 to US$637.20bn in 2006, US$651.08bn in 2007 and US$654.65bn in 2008. These figures include health premiums written by life insurers that rose from US$118.69bn in 2005 to US$141.20bn in 2006, US$151.46bn in 2007 and US$165.03bn in 2008. In relation to 2010, we estimate that premiums contracted by 3%. The III's review of the property and casualty insurers' 2009 results noted that net premiums shrunk by 3.7%.

At the time of writing, competitive pressures continue to contribute to the slow growth rates of the nonlife and life segments. Life penetration is also restricted by the mass of organised savings products that fall outside the purview of the insurance sector. However, the absolute increases in premiums that BMI forecasts for the next five years are substantial.

The US remains an important domicile for captive insurance companies. This is despite the proximity and attractions of well established offshore domiciles such as Bermuda and the Cayman Islands.

Issues To Watch Higher Costs

Despite stagnant premiums and while investment income is under pressure for many insurers, particular costs are increasing. This means that it may be difficult for life/health companies, property/casualty companies and health plans to contain claims costs over the coming year or so.

A Mixed Environment For Non-Life Insurers' Profits Non-life insurers continue to face several challenges. First, the rate of return is significantly less than their cost of equity capital, which is about 10%. Second, pricing for commercial insurance lines has been weak as key aspects of the US economy remain soft. A third challenge is that in an environment of generally low inflation, low nominal yields on bonds and very low interest rates, investment earnings will be constrained.

US Credit (Non-Government Bond) Markets US life/health insurers are one of the largest pools of capital that are exposed to any increase in volatility in US credit markets. A decision by life/health insurers to reduce exposures to bonds, which accounted for more than 75% of total investment assets in 2004, could have an adverse effect on credit markets.

  • Executive Summary
    • Table: US Insurance Sector At A Glance
  • Key Insights On The US Insurance Sector
  • Issues To Watch
  • SWOT Analysis
  • US Insurance Industry SWOT
  • US Political SWOT
  • US Economic SWOT
  • US Business Environment SWOT
  • Developed States Insurance Overview
    • Table: Developed States' Non-Life Segment - Premiums
    • Table: Developed States' Life Segment - Premiums
  • MetLife's Acquisition Of ALICO
    • Table: ALICO At A Glance
    • Table: ALICO's Pre-Tax Profits By Segment And Region Contribution, Year To November 30 2009 (%)
    • Table: ALICO - A Market Leader In Japan
    • Table: MetLife's Acquisition Of ALICO
    • Table: MetLife And ALICO Combined
  • Projections And Forecasts
    • Table: Insurance Premiums, 2008-2015
  • Projections And Drivers Of Growth
    • Table: Growth Drivers, 2008-2015
  • Country Update
  • Macroeconomic Outlook
    • Table: US Economic Activity, 2006-2015
  • Political Outlook
  • Long-Term Political Outlook
  • Insurance Business Environment Ratings
    • Table: The US' Insurance Business Environment Rating
    • Table: Developed States Insurance Business Environment Ratings
  • Developed States Context
    • Table: Non-Life Premiums In A Regional Context, 2009
    • Table: Life Premiums In A Regional Context, 2009
  • Key Players In The US Insurance Market
  • Regulators And Trade Associations
  • Numbers At A Glance
  • Non-Life Segment - Lines And Shares
    • Table: Principal Non-Life Lines, 2008 (US$mn)
    • Table: Top 10 Property And Casualty Insurers By Gross Written Premiums, 2008
    • Table: Top 10 Health Insurers By Gross Written Premiums, 2008
  • Life Segment - Lines And Shares
    • Table: Principal Life Lines, 2008 (US$mn)
    • Table: Top 10 Life Insurers By Gross Written Premiums, 2008
  • Reinsurance And International Links
  • Company Profiles
  • ACE Group
  • Aetna Group
  • Aflac
  • Allianz
  • Allstate
  • American Family Insurance Group
  • AXA
  • Berkshire Hathaway
    • Chartis
  • Chubb Group
  • CNA Insurance Group
  • The Hartford
  • ING
  • John Hancock
  • Liberty Mutual
  • Lincoln Financial Group
  • MassMutual
  • MetLife
  • Nationwide
  • New York Life
  • Principal Financial
  • Progressive
  • Prudential Financial
  • State Farm
  • Travelers Group
  • United Health Group
  • USAA Group
  • WellPoint Inc Group
  • Zurich America
  • Country Snapshot: United States Demographic Data
  • Section 1: Population
    • Table: Demographic Indicators, 2005-2030
    • Table: Rural/Urban Breakdown, 2005-2030
  • Section 2: Education And Healthcare
    • Table: Education, 2002-2005
    • Table: Vital Statistics, 2005-2030
  • Section 3: Labour Market And Spending Power
    • Table: Employment Indicators, 2001-2006
    • Table: Consumer Expenditure, 2000-2012 (US$)
    • Table: Average Annual Wages, 2000-2012 (US$)
  • BMI Methodology
  • Insurance Business Environment Ratings
    • Table: Insurance Business Environment Indicators And Rationale
    • Table: Weighting Of Indicators
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