Ranking Reveals Candidates For

Two of these standouts–top-ranked Courtesy Insurance Company and sixth-ranked Philadelphia Insurance Companies–reported combined ratios in each and every single year of the 12-year period that ranked among the 25 lowest for the 184 organizations analyzed.

Like the "Profit Leaders" presented in this report (on page 14) and in two earlier reports published by NU (Jan. 24, 2005 and Dec. 4, 2006), "Hall of Fame" contenders and "Champions" tend to be distinguished by specialization by business class or region.

Brief descriptions of some of the top performers over the last 12 years give further insight into what it takes to be a long-term champion.

o Courtesy Insurance

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

Courtesy, according to the Management Discussion & Analysis section of its financial statements, is 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.

(GAP insurance, generally, is a guaranty-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.)

Courtesy is also the smallest insurer included in our ranking, with just over $101 million in premiums recorded in 2005–64 percent of which were reported on the "aggregate write-in" line of the annual statement reflecting its focus on nonstandard credit-type business.

While this 64 percent level falls under a 75 percent threshold that NU uses to disqualify specialists in lines not traditionally considered property-casualty from its rankings, the high level is noteworthy as it could push the company off similar rankings published in future years, as could a decline in premiums below the $100 million threshold required for our rankings.

A "Profit Hall of Fame" voting committee as strict as the one that evaluates the eligibility of baseball players for Cooperstown would likely regard Courtesy's results as being juiced by nontraditional p-c lines. (See related story on page 18 for further explanation of NU's eligibility criteria.)

Putting that one special consideration aside, however, Courtesy's enviable underwriting track record includes a 12-year average combined ratio of 73.9 and individual combined ratios in each year from 1995 to 2006 that were ranked as the seventh-lowest or better.

o Philadelphia Insurance Companies

Niche underwriter Philadelphia Insurance in Bala Cynwyd, Pa., participates in a wide array of specialty insurance niches that includes liability and property package coverages for mental health organizations, hotels, boat dealers, accountants and nonprofit directors and officers, as well as collector car insurance.

Recent additions to the product line-up include museums, day spas and zoos, according to press statements issued by the insurer in the past four months.

Growing from only $62 million in net premiums written in 1995 to nearly $1.3 billion in 2006, Philadelphia's worst combined ratio in the 12-year period–a profitable 93.3–came back in 1999, while its best combined ratio over the period was 68.4 for 2006.

In 1998, Philadelphia stopped offering a package of general liability and property coverage for nursing homes and assisted-living facilities and incurred a loss-reserve charge related to that business in 1999.

Through the first six months of this year, Philadelphia's statutory combined ratio was 76.0, coming in near the low end of the range of combined ratios recorded for the prior 12 years.

Philadelphia Insurance, with its track record of profitability unblemished in recent years, was profiled in our inaugural publication of profit leaders. (See NU, Jan. 27, 2005, page 26.)

According to the group's 2006 annual statement, 98 percent of its business is in commercial lines, with over 70 percent of net premiums coming from package or multiple peril policies.

However, even Hall of Famers have bad years. Indeed, six organizations reviewed for this report had only one year in 12 where their combined ratios did not rank among the 50 lowest for the 184 entities for which 12 years of underwriting information was available for review.

Included among them:

o Two large private passenger auto writers–Los Angeles, Calif.-based Mercury Casualty and Progressive Insurance in Mayfield Village, Ohio.

o One single-state writer of personal and commercial lines–First Insurance Company of Hawaii.

o An agricultural specialist–AgriGeneral Insurance Company of Johnston, Iowa.

o Two specialty personal lines insurers–National Lloyd's Insurance of Waco, Texas, and Pacific Specialty of Menlo Park, Calif.

Descriptions of the three highest-ranked insurers in this group are presented below.

o Agri General Insurance Company had its only unprofitable year in the last 12 in 2002, with a combined ratio of 105.3. The highly volatile crop insurance line, however, also produced an unusually low combined ratio of 37.2 in 1997 and an average six-year combined ratio of only 68.1 for the period from 1995 to 2000, contributing to the second-lowest 12-year average 76.1.

The volatility of the crop insurance lines is also evident in fairly wide combined ratio swings for Rural Community Insurance Company, another crop specialist.

o Pacific Specialty Insurance, with nearly 90 percent of its business coming from California, and most of that from homeowners, also proclaims itself a leader in motorcycle and personal watercraft coverage.

Commencing business as a motorcycle insurer in 1990, the insurer added watercraft in 1994 and the property lines in 1995 when it wrote less than $17 million in net premium in total. Reaching the $100 million premium mark in 2002, Pacific Specialty wrote $116 million in net premiums in 2006, making it one of the smallest companies in this report.

Although licensed in 50 states, the insurer, affiliated with the McGraw Group, wrote more than 97 percent of its direct premiums in just five states in 2006.

The McGraw Group, according to Pacific Specialty's Web site, includes a personal lines general agency founded in 1976, a commercial lines general agency, and a service-contract provider for motorcycles and "JetSki" type personal watercraft.

o National Lloyd's, which wrote 83 percent of its 2006 direct premiums in its home state of Texas and 95 percent in just three states (Tennessee and Oklahoma being the other two), is licensed in 18 states.

Chartered in 1948, the company describes itself as "focused on markets which are primarily considered niche."

Offerings include dwelling fire and homeowners with coverage maximums of $250,000, with the homeowners and dwelling lines representing 95 percent of its business. The group introduced a commercial program for small business and builder's risk in 1995.

The only unprofitable year in the last 12 for National Lloyd's came back in 1995, with a 102.1 combined ratio. More recently, the average combined ratio for the three years ended 2006 was 78.1, and through the first six months, the combined ratio was 83.8, just 1.0 point above the group's 12-year average.

Like Pacific Specialty, National Lloyd's is among the smallest groups in our listing with only $110 million in net premiums for 2006. Declining premiums in future years could push both out of contention for the "Profit Hall of Fame" going forward.

Rounding out our "Hall of Fame" candidates this year are four insurance groups that had just two years in the last 12 in which their combined ratios were higher than the best 50 among our 184 groups. They include:

o Two specialty insurers–Peoria, Ill.-based RLI Group and Penn America (part of United America Indemnity Group) in Hatboro, Pa.

o Personal auto insurer Commerce Group in Brewster, Mass. (recently acquired by Spain's largest insurer, MAPFRE S.A. in a $2.2 billion deal).

o IDS Property Casualty out of Wisconsin.

Among the top-25 "Profit Champions," 18 wrote at least 70 percent of 2006 direct premiums in just two lines of insurance, including every one of the top-10 "Champions." Three of the remaining seven wrote in only one state, with two of those in Hawaii.

In total, six of the top 25 wrote all of their business in a single state, and 11 wrote 95 percent of their 2006 direct written premiums in five or fewer states.

The listing of profitable property-casualty insurance organizations based on combined ratio measures included in the Dec. 3, 2007 edition of NU omitted at least one very profitable group–Ohio Mutual Group of Bucyrus, Ohio.

The omission occurred because the combined NAIC filing for the two individual companies that make up the group–Ohio Mutual Insurance Associates and United Ohio Insurance Company–was not available in the database used to construct the NU rankings.

In the absence of a combined filing, the two companies individually did not meet the net written premium threshold of $100 million necessary to qualify for our ranking. Taken together, however, these two companies reported $120.8 million of net written premiums in 2006.

Not only would the group have qualified for the ranking at that level, but with a 12-year average combined ratio of 97.8 for the years 1995-to-2006, Ohio Mutual Group would have ranked as a "Profit Champion," with a 37th-place ranking on NU's "Profit Champions" listing.

Ohio Mutual's six-year average combined ratio for 2001-2006, at 98.2, would have placed the group in 55th place on our ranking of "Profit Leaders," which measures shorter-term profits, for the latest six-year period.