Risk retention groups continue to exhibit financial stability, in spite of underwriting losses recorded in the first quarter of 2012, said Demotech.
Assets and policyholders surplus have continued to increase at a quicker rate than total liabilities. Since first quarter 2008, short-term assets have increased 36.8 percent and total admitted assets have increased 29.5 percent.
“More importantly, policyholders surplus has increased 64.3 percent during this time, while total liabilities have only increased 13.5 percent,” said a statement from the Ohio-based financial analysis firm.
Liquidity, as measured by liabilities to cash and invested assets, for first quarter 2012, was approximately 76.2 percent. “A value less than 100 percent is considered favorable as it indicates that there was more than $1 of net liquid assets for each $1 of total liabilities. This also indicates an improvement for RRGs collectively over for first quarter 2011 as liquidity was reported at nearly 80 percent.”
Leverage, as measured by total liabilities to policyholders surplus, for first quarter 2012, was approximately 150 percent. This indicates an improvement for RRGs collectively over first quarter 2011 as leverage was reported over 161 percent.
The combined ratio, as measured by loss ratio plus expense ratio, for first quarter 2012 was 88.1 percent. This indicates an improvement for RRGs collectively over first quarter 2011, as the combined ratio was reported at 90.6 percent.
A $10 million net underwriting loss was reported by RRGs collectively for first quarter 2012. However, RRGs did collectively report a $49.8 million net income for first quarter 2012.
Demotech provides a consultancy service that offers analysis and benchmarking used by self-insureds, captives, risk retention groups and insurance companies.