Oldwick, New Jersey, January 18, 2024–(BUSINESS WIRE)–The Personal Auto, Homeowners, and Farmers business segment accounted for 13% of premiums within the U.S. Property and Casualty Insurance (P/C) Farm Bureau segment over the past two years, according to a report. It is said to have facilitated the increase.new AM best report.
this Best Market Segment Report AM Best points out that the growth of the Non-Life Insurance Bureau Group is broadly in line with the growth of the non-life insurance industry as a whole. Over the past 10 years, direct written premiums (DPW) for this property and casualty insurance sector have increased from $12.6 billion to $17.3 billion in 2022. Most of the Farm Bureau's exposure is concentrated in short-term to medium-sized personal insurance business. The sector has also faced underwriting challenges in recent years, primarily due to adverse weather conditions and inflation, putting a strain on these organizations' revenues not only in 2022 but also in the first nine months of 2023.
The report notes that despite overall premium growth, Farm Bureau's market share in its core business is on the decline. One-third of single-state farm bureaus have double-digit market shares in their top business areas. Only two companies have double-digit market shares in both of their two main business areas.
“While individual companies typically have policy retention rates above 90%, which is better than the industry as a whole, geographic and business areas remain concentrated,” said Christopher Lewis, senior financial analyst at AM Best. “There is,” he said.
Through 2022, policyholder surplus has consistently increased, with an average increase of 4.9% since 2013, driven by AM Best Ratings' historically favorable net income. In general, the sector remains largely well-capitalized, with 82% achieving the highest two levels under AM Best's Balance Sheet Strength Rating.
However, these P&C insurance offices are geographically concentrated, with two-thirds of the companies rated getting their premiums from a single state. Concentration of these types of material premiums in a single state can expose them not only to catastrophic risks but also to regulatory pressures.
The report notes that single-state farm bureaus are starting to open more operations outside their own states. While this can be beneficial in the long run, premium growth is often slow and insignificant and relies on alternative distribution strategies such as direct-to-consumer sales. Further complicating matters, the Farm Bureau is required to disperse its out-of-state operations and establish separate subsidiaries to comply with marketing and licensing requirements. “With this in mind, some Farm Bureaus are diversifying their premiums by acquiring smaller insurance companies outside their home base,” Lewis said.
For the dual-focused Farm Bureau, the profitability challenges experienced in some P&C lines are partially alleviated by the underwriting of life/annuity business. “This could provide additional benefits in the areas of distribution, pricing and management expertise, as well as capital support,” Lewis said. “Such relationships can boost the Farm Bureau beyond the many personal lines and life carriers that write exclusively for such businesses.”
Total direct premiums among the organizations that make up the AM Top Rated Life and Annuities Farm Bureau population have varied on an annual basis within the range of $2.7 billion to $3.2 billion over the past 10 years. The overall proportion of general life insurance, annuity insurance, investment products, and accident and health products has remained relatively consistent over the past decade. General life products have historically accounted for approximately 70% of corporate pensions and 20% of personal pensions. “We've seen a bit of a shift away from pensions in recent years, with more emphasis on protection products,” Lewis said.
To access the full version of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=339662.
AM Best is a global credit rating agency, news publisher, and data analytics provider focused on the insurance industry. The company is headquartered in the United States, with offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore, and Mexico City, and does business in more than 100 countries. For more information, please visit: www.ambest.com.
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