State Fund’s results of operations for years ended December 31, 2017 and 2016 and its corresponding financial ratios are shown below:
(In millions) | 2017 | 2016 | |
Net premiums earned | $ | 1,310 | 1,527 |
Losses incurred | 521 | 1,130 | |
Loss adjustment expenses incurred | 1,014 | 493 | |
Underwriting and administrative expenses | 433 | 382 | |
Net underwriting loss | (658) | (478) | |
Net investment and realized gain (loss) | 741 | 696 | |
Other income (loss) | (42) | (31) | |
Income before dividends | 41 | 187 | |
Dividends to policyholders | 0 | 5 | |
Net income | $ | 40 | 192 |
Loss ratio | 39.8% | 74.0% | |
LAE ratio | 77.4% | 32.3% | |
Underwriting expense ratio | 32.2% | 23.9% | |
Combined ratio | 149.4% | 130.2% |
State Fund's premium continued to decline in 2017. The decline of State Fund's premium can be attributed to the soft market, increased competition, and decreased premium rates of 8% and 9.5% effective September 2017 and 2016, respectively. State Fund had a $658 million underwriting loss in 2017 compared to a $478 million underwriting loss in prior year. The 2017 underwriting loss increased due to decline in premium of $217 million, shifting of expenses from losses to losses adjustment expenses (LAE) of $448 million and additional LAE strengthening of $217 million. The board of directors did not declare dividends for 2017 and 2016. State Fund realized a net income of $40 million and $192 million for years ended December 31, 2017 and 2016.