'Biggest Not Necessarily Most Profitable

o Agri General Insurance Company, a multi-state crop insurer that "focuses on rural America," according to the company Web site.

o IDS Property Casualty, a group of p-c insurers that were once part of the American Express family. As a result of a spin-off of American Express Financial Corp. in September 2005, IDS is now a subsidiary of the resulting company, Ameriprise Financial, but the insurer's principal business remains providing insurance to American Express cardmembers.

o Regional insurers, such as the North Star Companies (providing insurance for homes, autos, farms and businesses in Minnesota and four other states), Acuity Mutual Group, based in Sheboygan, Wis., and First Insurance Company of Hawaii, which writes only in its home state.

o Niche underwriters Philadelphia Insurance of Bala Cynwyd, Pa., and RLI Corp. of Peoria, Ill., which both participate in a wide array of specialty insurance niches. (At Philadelphia, these include liability coverage for mental health organizations, hotels, boat dealers and non-profit directors and officers, while RLI writes a diversified portfolio of p-c coverages and surety bonds serving underserved markets, according to its RLI's site.)

o Carriers principally writing personal auto insurance: Mayfield Village, Ohio-based Progressive Casualty Group, Los Angeles-based Mercury Casualty, Commerce Group in Brewster, Mass., and Columbus, Ohio-based Safe Auto Insurance.

o Raleigh, N.C.-based Builders Mutual, which grew out of the North Carolina Home Builders Self Insurers Fund, developed by the members of the North Carolina Home Builders Association. "Protecting builders is all we've ever done, and all we ever plan to do," the company's Web site says.

To make it into the NU Top-25 this year, an insurer's six-year average ratio had to be less than 95. For our prior report, a result less than 99 was good enough.

Those joining the ranks of the Top-25 for this report not only reported at least five points of underwriting profit, but–like the repeat performers on the list–newcomers almost all define themselves as specialists in some narrow corner of the p-c market.

FM Global in Johnston, R.I., for example, has built its reputation insuring highly-protected property risks since 1835, while Cherokee Insurance, in Sterling Heights, Mich., specializes in insuring trucking risks.

Rye Brook, N.Y.-based Navigators– founded as a ocean marine underwriting agency more than 30 years ago–reports that 60 percent of its premiums remain in that line, while professional liability and contractors niches now comprise some of the insurer's other specialty focuses.

MEEMIC and United Educators both focus on education classes. Auburn Hills, Mich.-based MEEMIC provides personal lines to teachers and their families, while United Educators, a risk retention group in Chevy Chase, Md., provides general liability coverage to educational institutions.

Geographic focus is also a common theme among the profit leaders, some of which are among the nation's oldest insurers. They include Franklin Mutual Insurance (insuring New Jersey residents and businesses since 1879); Lincoln Neb.-based Farmers Mutual Insurance of Nebraska (insuring Nebraskans since 1891 and venturing into South Dakota in 1998); and Pioneer State Mutual in Flint, Mich. (writing in Michigan exclusively since 1908).

Likewise, Tower Insurance of New York reported that all its p-c premiums for 2005 were in a single state (New York), while Pacific Specialty, with nearly 90 percent of its business coming from California (most of that from homeowners), also proclaims itself a leader in motorcycle and personal watercraft coverage.

Among the Top-25 on our Profit Leaders list, 14 write 95 percent of their business in five or fewer states. Eight among the group write just five lines of insurance or less.

Exceptions

Proving that specialization isn't the key to underwriting profits, medical malpractice specialists populate the bottom of NU's profit rankings, with nine of the 25 worst performers devoted to the line (see page 20), in spite of improving med mal combined ratio trends in recent years.

In fact, all the med mal insurers included in this year's analysis rank among the bottom 50, with The Doctors Company of Napa, Calif., ranked the highest among them, coming in at number 172.

A regional focus can have its problems as well–a fact proven by Mississippi Farm Bureau in Jackson, Miss, the only real newcomer to the ranks of the worst-25 performers. (Other newcomers would have qualified to bottom-tier rankings last year as well, but failed to meet NU's size threshold requiring premiums of $100,000 or more to be included in our prior analysis.)

Mississippi Farm Bureau, which reported a combined ratio of 445 for 2005, ranked 218th in the present analysis, but took the 69th spot last time with an average six-year combined ratio of 103.

In addition, all but two reinsurers–Bermuda-based Everest and Midland, Mich.-based Dorinco (affiliated with Dow Chemical)–also rank among the 25-worst performers in the current report, while the bottom-50 group is heavily weighted with generalized commercial and liability writers.

Climbing up from the depths of our rankings has proven nearly impossible, with 20 organizations falling among the worst-25 performers in both this report and the prior one. While a handful moved off the list completely because dwindling premiums made them too small to qualify for our ranking, only one moved up from the bottom 25: San Mateo-based California Casualty.

Top Three

Although the criteria to be included in our rankings attempts to exclude insurers that specialize in accident and health as well as guaranty and credit coverages, three significant writers of these lines of business–Stonebridge Casualty, Courtesy Insurance and IDS Property Casualty–managed to garner the top spots on our rankings this year. (See related story on page 18 for further explanation of the eligibility criteria.)

o Taking first place, Stonebridge, which recorded 24 percent of its net premiums in 2005 in accident and health and credit business, classified the bulk of its premiums as inland marine.

According to descriptive information contained in the Management's Discussion and Analysis section in its annual statement, Stonebridge's largest and fastest growing lines are its travel insurance and guaranteed auto protection products. (GAP insurance, generally, is a credit-type product that covers the difference between a car's actual cash value, recovered from a traditional auto insurer for a totally damaged or stolen car, and the lease or loan value on a vehicle.)

o Second-ranked Courtesy Insurance is affiliated with Deerfield, Fla.-based JM Family Enterprises, which describes itself as a vehicle processing, distribution and finance services organization.

The insurer recorded 70 percent of its 2005 net premiums on the "aggregate write-in" line of the annual statement (just under NU's 75 eligibility threshold). Courtesy, according to its MD&A, was also primarily involved in GAP insurance (which the company refers to as total-loss protection) and automotive warranty (covering the risk associated with extended service contracts sold on new and used vehicles).

o For IDS, as was the case in our prior analysis, the presence of business recorded on the accident and health line propelled the company near the top of our profit leaders list, landing it in third place.

While accident insurance represents only 10 percent of its business, the combined ratios for the line were low enough (roughly 30.0 in 2005) to offset results in lines such as personal auto liability (coming in with roughly a 117 combined ratio in 2005) that would have otherwise landed the company somewhere among the bottom-25 performers.

Had our criteria for analysis been sufficient to exclude these insurers from our rankings, then three writers of more traditional p-c businesses–all coming in with six-year average combined ratios of 98.2–would have moved up among the top 50 profit leaders.

They are: W.R. Berkley Corp., a specialty group based in Greenwich, Conn.; The Safety Group, a Boston-based insurer writing primarily personal auto insurance only in Massachusetts; and Germania Insurance Group of Brenham, Texas, which writes only in Texas and classifies nearly two-thirds of its business as rural property.