Mother Nature hits USAA with $2B in claims
A third straight year of hefty catastrophe-related insurance claims dented USAA’s bottom line in 2018.
The San Antonio insurance, banking and financial services company earned just under $2.3 billion on record revenue of almost $31.4 billion last year, the company said Thursday in its annual report to members.
By comparison, the company turned a roughly $2.4 billion profit on $30 billion in revenue in 2017.
USAA paid out more than $2 billion on 290,000 catastrophe claims, including from two hurricanes, hailstorms, earthquakes, wildfires and even a volcano, spokesman Matt Hartwig said in an email. It was the third straight year it has paid out more than $2 billion in catastrophe claims.
Overall, all claims payouts were nearly $16 billion in 2018, an increase of about $1 billion from 2017. Noncatastrophe losses rose as a result of an increase in the number of homeowner claims and rising costs for auto parts and repairs, USAA said.
USAA’s net worth, a measure of its financial strength, ended last year at almost $31.2 billion — another record. It was $30.6 billion at the end of 2017. Net worth is the difference between assets and liabilities.
Despite the dip in profit, USAA returned $1.8 billion in distributions, dividends, bank rebates and rewards to members last year. That was up from almost $1.6 billion in 2017.
USAA serves members of the military, veterans and their families. It ended last year with 12.8 million members, up 400,000 for the year. It added about 500,000 members in 2017.
The company expanded its workforce by about 1,000 to about 34,000 last year. More than 19,000 are employed in San Antonio — including about 700 in downtown.
Earlier this year, USAA reported employees would receive the lowest annual bonus since 2008 as a result of the catastrophe claims. The bonus was 14.8 percent of their base salary, down from 16.2 percent in 2017.
In a letter to shareholders, USAA CEO Stuart Parker said the deal to sell its investment management business to Ohio-based Victory Capital Holdings Inc. for at least $850 million will give USAA members access to “greatly expanded investment choices.”
Also Thursday, USAA Chairman Lester L. Lyles told members that he will retire following the company’s annual meeting in August. Lyles, who has served in the post for six years and as a director for 14 years, will be succeeded by Vice Chairman Thomas Fargo.
Meanwhile, USAA collected $22.2 billion in insurance premiums last year, a roughly 10.6 percent increase from 2017.
Stock market returns were the worst in a decade last year, which was reflected in USAA’s investment returns. It generated almost $2.3 billion in investment income last year, down 29 percent from 2017.
The company said it blocked 13 million cyberattacks and prevented more than $11 million in fraud losses each day last year. That amounts to more than $4 billion for the year.
USAA said it invested in “technology, processes and talent to keep pace with (its) overall growth and near doubling of its members over the past decade. A key focus in 2018 was to strengthen our ability to meet regulatory expectations over the long term, enabling USAA to provide consistent member experiences.”
Still, its banking operations recently have come under scrutiny from regulators.
The Office of the Comptroller of the Currency, which regulates banks, earlier this year issued a cease-and-desist order against USAA Federal Savings Bank for “engaging in unsafe and unsound banking practices.”
The OCC’s action was unrelated to a $3.5 million civil penalty and $12 million in restitution that the Consumer Financial Protection Bureau ordered the bank to pay in January to settle charges that USAA violated banking laws.
The bank failed to honor customers’ stop-payment requests on electronic fund transfers and had reopened customers’ previously closed deposit accounts without their authorization, the federal consumer watchdog agency found.
USAA, the bank and the USAA Foundation Inc. donated $36 million to support military and community causes last year. Employees and retirees also donated $10 million to support nonprofits and volunteered more than 500,000 hours.