The listing of most profitable property-casualty insurance organizations based on combined ratio measures included in the Dec. 4, 2006 edition of National Underwriter omitted one profitable group–Accident Fund Insurance Company and Affiliates–and had another profitable company (Seabright Insurance) ranked near the bottom of the list.

The problems occurred because of the rigidity of NU's criteria for constructing the rankings. A clarification follows:

In the first case, one of the criteria that pushed Lansing, Mich.-based Accident Fund off our list states that the only eligible organizations for our ranking are individual insurers that are not part of a larger group, or organizations that reported combined results to regulators in 2005 (combined filers).

Our criteria also require that an eligible organization must have reported six years of combined ratios.

Although four Accident Fund companies reported financial results on a combined filing in 2005, since the companies filed their results individually prior to 2005, the combined filer that was flagged for analysis failed the six-year combined ratio test.

Added together, the individual companies had a six-year average combined ratio of 95.6, which would have placed Accident Fund group in 30th place on our ranking.

The 209th place ranking of Seabright Insurance mischaracterizes the profitability of the Seattle-based specialty workers' compensation insurer, which had an average combined ratio of 85.6 for the last two years.

Our ranking, which list the company as having a 125.8 six-year average combined ratio, is based on an arithmetic average that includes four years for which premiums were too small to produce reliable combined ratios indicative of actual performance.

This problem, discussed in the article accompanying our rankings, can be addressed in several ways–either by applying size criteria to the entire six-year period under study, or by using volume-weighted combined ratios.

It is likely that in any future publications of profit rankings, we will require that insurance organizations have reported net written premiums greater than $100 million in each of the six years studied, rather than applying the size requirement to the latest year only, as is currently the case.

Special Reports /

NU Clarifies Rankings For Accident Fund, Seabright

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