You must read this carefully. Surplus continues to grow, which means companies remain flush with cash. Thank you a great investment year. There are more reserve take-downs available too.
Had we had a low investment year, along with cats, then you might see rates move. Until such time as there is an erosion of surplus, don’t expect anything to change.
Despite the slight decline in net income, industry surplus grew 6.8 percent to $733.8 billion in 2017, driven by a $39.4 billion increase in unrealized capital gains, which was offset by a $17.5 billion decrease in other surplus gains and a $4.4 billion increase in stockholder dividends.
I may be mixing apples and oranges but this scenario, which plays out over and over, is one reason I don’t recommend young people go into the sales side of insurance, at least not as a long term captive. You can work your tail off, be promised the moon, Jupiter, and regular trips to Nirvana and then have the rug pulled out from under you by the company on the wrong side of the loss ratio and their investment returns.
In the meantime your mortgage is still due and the baby would like a bottle of warm milk before bedtime.
Tru that Dnuts but if you’re working for wages or salary your take home is more steady, and your skills more quickly portable from one job to the next. You move from one career to the insurance industry (agency) based on overblown hype from some district manager, get married, start a family and then the company blows up leaving you knocking against their hull after you invested a lot of time and energy, not to mention probably some savings, building up “your own business.” Any agent who’s been through one policy renewal knows they have little control over the rates, and unless they cheat profusely, which happens more frequently than management is willing, or are alert enough, to admit, a large rate increase goes shopping.
(For example, putting a high credit score person in the household to get a better rate, even if that person does not reside there.)
Often, when you try to discuss rates with management you get a ‘deer in the headlights’ stare.
Sometimes, it seems, they would rather spend their time emailing than getting out in the field.
They tell you your results are unacceptable, but when you press them for guidance on what to do they have no answer. (so why do they have managers then?)
The human carnage in the contracted/employed sales side of the insurance industry is not low. ( I understand it is hard to find prospecting type sales people, and companies sometimes toss new agents against the wall to see if they stick.) It’s not entirely managements’ faults, consumers demand the cheapest prices for what they deem to be a commodity; and it’s understandable how the big companies just keep growing, as they can better weather the underwriting cycles in this hyper competitive industry.
It must have been a lot of fun when the industry was growing after ww 2.
A 3x hit does soak up capital…but the industry remains flush with capital investment, keeping cost of capital low. With this industry, however, it is not one (and sometimes not two) years that make or break, it will be the third year of a trend of three years that starts to shake. Now, for some carriers, is this really year 2? Another thought, is how to account for a trend of cat losses – almost counterintuitive.
It means they have unrealized gains; bought them for $39.4bb more than the current value if they were to sell. They won’t book that gain or loss until they do sell; it only affects their balance sheet, but it does increase the capital base – which is an enemy of smart underwriting.
And yet, commercial rates STILL aren’t going up very much. What gives?
You must read this carefully. Surplus continues to grow, which means companies remain flush with cash. Thank you a great investment year. There are more reserve take-downs available too.
Had we had a low investment year, along with cats, then you might see rates move. Until such time as there is an erosion of surplus, don’t expect anything to change.
Despite the slight decline in net income, industry surplus grew 6.8 percent to $733.8 billion in 2017, driven by a $39.4 billion increase in unrealized capital gains, which was offset by a $17.5 billion decrease in other surplus gains and a $4.4 billion increase in stockholder dividends.
I may be mixing apples and oranges but this scenario, which plays out over and over, is one reason I don’t recommend young people go into the sales side of insurance, at least not as a long term captive. You can work your tail off, be promised the moon, Jupiter, and regular trips to Nirvana and then have the rug pulled out from under you by the company on the wrong side of the loss ratio and their investment returns.
In the meantime your mortgage is still due and the baby would like a bottle of warm milk before bedtime.
That’s true with almost every job. Gotta love capitalism!
Tru that Dnuts but if you’re working for wages or salary your take home is more steady, and your skills more quickly portable from one job to the next. You move from one career to the insurance industry (agency) based on overblown hype from some district manager, get married, start a family and then the company blows up leaving you knocking against their hull after you invested a lot of time and energy, not to mention probably some savings, building up “your own business.” Any agent who’s been through one policy renewal knows they have little control over the rates, and unless they cheat profusely, which happens more frequently than management is willing, or are alert enough, to admit, a large rate increase goes shopping.
(For example, putting a high credit score person in the household to get a better rate, even if that person does not reside there.)
Often, when you try to discuss rates with management you get a ‘deer in the headlights’ stare.
Sometimes, it seems, they would rather spend their time emailing than getting out in the field.
They tell you your results are unacceptable, but when you press them for guidance on what to do they have no answer. (so why do they have managers then?)
The human carnage in the contracted/employed sales side of the insurance industry is not low. ( I understand it is hard to find prospecting type sales people, and companies sometimes toss new agents against the wall to see if they stick.) It’s not entirely managements’ faults, consumers demand the cheapest prices for what they deem to be a commodity; and it’s understandable how the big companies just keep growing, as they can better weather the underwriting cycles in this hyper competitive industry.
It must have been a lot of fun when the industry was growing after ww 2.
A 3x hit does soak up capital…but the industry remains flush with capital investment, keeping cost of capital low. With this industry, however, it is not one (and sometimes not two) years that make or break, it will be the third year of a trend of three years that starts to shake. Now, for some carriers, is this really year 2? Another thought, is how to account for a trend of cat losses – almost counterintuitive.
CAT Reinsurance and Tax Write-Offs will both make carriers’ bottom lines look & feel better….
What does “$39.4 billion increase in unrealized capital gains” mean? Does it mean insurers sell all these stocks and realize the capital gain?
It means they have unrealized gains; bought them for $39.4bb more than the current value if they were to sell. They won’t book that gain or loss until they do sell; it only affects their balance sheet, but it does increase the capital base – which is an enemy of smart underwriting.