USAA’S net worth grows $5 billion.
Insurer defends strong finances assailed by critic
While the pandemic caused a financial toll for many last year, San Antonio insurer and financial services company USAA prospered.
USAA reported its net worth — its assets minus liabilities — jumped more than $5 billion, or 14.5 percent, to end 2020 at an alltime high of $40.4 billion. The company considers net worth a measure of its financial strength.
USAA’S 2020 results left Douglas Heller, an advocate at the Consumer Federation of America, bewildered.
“It doesn’t seem like a year in which an insurance company should have significantly improved its already strong financial situation when its members’ financial situation became more precarious than ever,” Heller said.
The increase in USAA’S net worth suggests it “took too much advantage of the pandemic’s impact on its policyholders,” Heller added.
USAA members saved the company money by driving fewer miles and getting in fewer accidents due to the COVID-19 shutdown. That resulted in a $2.7 billion drop in non-catastrophe losses.
In response, USAA paid $1.1 billion in special dividends in three rounds to auto policyholders last year. In total, the company issued almost $1.3 billion — another record — in dividends to policyholders, compared with $186 million in 2019.
USAA gave back a lot to its members but should have given back even more or charged them less, Heller said.
“USAA’S asset growth was fueled in part by higher bank deposits and higher unrealized gains in our bond portfolio,” spokesman Christian Bove said in
an email. “It is not accurate to attribute that increase to just one line of business.”
The insurer collected almost $25.4 billion in insurance premiums last year, an increase of $1.4 billion, or nearly 6 percent, from nearly $24 billion in 2019.
Overall, USAA returned almost $3.1 billion to members in distributions, dividends, bank rebates and rewards last year, up from nearly $2.4 billion in 2019.
“USAA’S strong financial position illustrates our association’s resiliency through the economic shocks of 2020, cultivated over nearly 100 years of diversification,” USAA Chairman Tom Fargo said in the company’s annual report.
The $2.7 billion reduction in non-catastrophe losses more than offset the record $2.4 million in catastrophe losses that USAA sustained last year. Its members filed 80 percent more claims than in 2019 as a result of damages caused by strong wind and rain, hurricanes, freezing temperatures and wildfires.
The company registered more than 75 catastrophe events in 45 states, including 23 in Texas. It had about $1 billion in catastrophe claims in 2019.
USAA posted $3.9 billion in net income last year, slightly less than the record $4 billion it made in 2019. Its comprehensive income, which includes unrealized gains on investments, rose about $500 million to $6.1 billion in 2020 from $5.5 billion in 2019.
The company also generated record revenue $36.3 billion last year, a bump from $35.6 billion in 2019.
USAA serves more than 13 million members, roughly around the same as in 2019. Member growth was affected by last year’s sale of its investment services business to Charles Schwab Co. The transaction, which included brokerage and managed portfolio accounts, added to USAA’S revenue last year.
USAA’S membership is made up of active military personnel, veterans and their families. It has no affiliation with the U.S. military. The company retained 95 percent of its members last year.
USAA’S total assets swelled by $27 billion, or 15 percent, last year to $200.3 billion. Its investment portfolio rose by almost $32 billion last year, fueled in part by the higher bank deposits and unrealized gains in its bond portfolio.
Its liabilities climbed by $21 billion, or 16 percent, due to bank deposits rising $16.7 billion, or 21.5 percent, to $94.2 billion. USAA attributed the increase in balances in checking and savings accounts to the federal economic stimulus programs and lower member spending.
“I am confident that 2021 will be a year of recovery for our country and the global economy,” USAA CEO and President Wayne Peacock said in the annual report. He assumed the posts in February 2020.
Despite another solid financial performance last year for USAA, employees’ annual bonus dropped for a sixth straight year. USAA awarded employees a bonus equal to 10.1 percent of their salary in 2020, the lowest amount since 2007 when the annual perk was first publicized.
USAA is San Antonio’s second largest employer, with about 19,000 of its 36,000 employees working here.
The company reported 47 percent of its employees identify as a person of color and 53 percent are women.
The company and USAA Foundation Inc. have committed $87 million to nonprofit organizations in support of pandemic-related relief, advancing racial equity and other community needs.