Branch Insurance more than doubled its total premiums last year – but claims tripled amid industrywide record losses. Several climate disasters hit Texas, where Branch has a heavy concentration.
Direct losses incurred totaled 1.4 times direct premiums earned in 2023 for Branch Insurance Exchange, according to the annual report filed this month with the Ohio Department of Insurance.
In the Columbus startup's third year issuing bundled home and auto policies, premiums totaled $167 million, the report said – rapid growth from $81 million in 2022 and $6 million its first year.
"2023 was a historically difficult year for home and auto insurers, and Branch, as a smaller carrier, felt those same impacts at an even more exaggerated level, including the Texas storms," the company said in a written statement to Columbus Business First.
The effects of a long-term turnaround strategy that started in late 2022 are unfolding, the company said in its statement. Branch raised rates and worked to diversify the mix of insurance risk.
"It takes a while for a strategy like that to manifest in homeowners because the policies are a year long, but we are well into our process and have significantly less concentration now than we had when those losses occurred," the company said.
Last year turned out to be the “costliest insured year on record for the U.S.,” with $60 billion in claims due to hail, tornadoes and other storms, according to the annual natural catastrophe report from reinsurer Gallagher Re. The previous record was 2020’s $44 billion; storm costs exceeded $40 billion only one other year.
Claims plus administrative expenses were 110% of premiums written for all personal insurance lines including homeowner and auto, according to a report by the Insurance Information Institute and Milliman.
Texas represents 57% of premiums for Branch, and last year the state had a record 16 storm events that resulted in $1 billion or more damages, according to the National Oceanic and Atmospheric Administration.
For example, in 2023 Texas had 1,123 hailstorms, one of the costliest weather events for insurers, according to the Insurance Information Institute. The next highest was Nebraska at 486 hailstorms.
The loss ratio for Texas was 1.5, compared to 1.4 for the whole group. Only one other state with a much smaller customer base had a higher ratio.
Parent Branch Financial Inc. was valued at $1 billion when it raised a $147 million private equity round in 2022. The company based on Capitol Square had two rounds of layoffs, in June and January, to preserve capital.
The startup uses technology to streamline administration, while avoiding expensive ad campaigns. It works with mortgage lenders, auto dealers and home security services to present bundled home and auto quotes at the time people are actively shopping for insurance.
The Branch Insurance Exchange, the entity reporting premiums and claims to the state, is organized as a reciprocal exchange, meaning insured members have ownership. When there's a surplus in premiums vs. losses it would get returned to policyholders, according to the website. The company takes a flat 5% management fee, which it contends is the lowest in the industry.
Branch Financial controls the Branch Insurance Exchange but is capitalized separately, the statement said. The financial parent infuses capital into the exchange as needed to meet state statutory minimums.
When the exchange has enough members, it would be profitable enough to maintain that surplus on its own, the statement said.
Last year Branch was certified as a B Corp – a for-profit company demonstrates a commitment to promoting community and member interests.
U.S. property and casualty insurers as a whole had a 66% loss ratio for all lines including home and auto, according to the National Association of Insurance Commissioners. Market leader State Farm had an 83% ratio.
Root Inc., the publicly traded Columbus digital-first auto insurer, had a loss ratio of 65% from its two entities that report to the state insurance agency. The company raised rates aggressively at the beginning of 2023 and let unprofitable policies lapse before adding new members at higher premiums in the second half of the year.
For more on Root's turnaround strategy following several years of losses, see this Friday's cover story in Business First.
