Exclusive Ohio economic roundup for Independent Agents
The state is continuing to show positive signs of economic recovery. Ohio has experienced a significant drop in the unemployment rate, most businesses that were previously closed have reopened and the Paycheck Protection Program (PPP) proved effective in keeping people working. In addition, while our COVID-19 cases, hospitalizations and deaths are trending upward recently, they continue to trail behind other peer states.
According to Moody’s Analytics, “Despite the immense economic damage already sustained, Ohio remains relatively less exposed to the impact of the virus compared with peer states, and signs of an initial turnaround are appearing. Ohio currently has the 16th lowest infection rate of any state and has the sixth lowest overall economic exposure to the virus. Specifically, Ohio is less exposed to the downturn in tourism and travel sectors than most states.”
Specifically, Ohio and the insurance industry have recently experienced the following economic activity:
- Ohio’s unemployment rate fell 3% from May (13.9%) to June (10.9%) The number of unemployed workers in the state last month was 631,000, down from 797,000 in May.
- The U.S. unemployment rate for June was 11.1%, down from 13.3% in May.
- Ohio’s initial claims for unemployment insurance are down 84% since peak, and payroll employment rose in May after big losses in the prior two months.
- Ohio’s state government is weathering the reduction with a combination of 20% budget cuts and utilizing the $2.7 billion rainy day fund. While the coronavirus impacts were severe on overall tax receipts for the FY 2020 as estimates were below by about $1.1 billion, or 4.6%. The state closed out FY 2020 without dipping into the Budget Stabilization Fund despite the lost revenue.
- In a sign of continued economic recovery, state tax receipts totaled $2.23 billion and were just $50.5 million, or 2.2%, below estimates for the month of June, according to the Office of Budget and Management’s
- Ohio is moving forward with $550 million in spending on capital projects
- Progressive Corp. posted a surprised Q2 earnings report with their bottom line increasing 10.2% over a year-ago quarter and having net premiums increase 11% over the same period.
Not all the news is good coming from Ohio’s insurance industry, as many insurance companies are reporting much higher Q2 catastrophic losses than in previous years. This should be partially offset by the reduction in auto claims in Q2 as a result of less miles being driven during the stay at home order.
Specifically, the preliminary results coming from Cincinnati Insurance Company –
- Cincinnati Financial says consolidated Q2 results are expected to include pretax catastrophic losses of $231m stemming from exposure to severe storms and civil unrest.
What this means for Independent Agents?
As premium deferral periods begin to lapse, more businesses and people are going back to work and should be able to repay deferred premiums and continue payments for current insurance coverage.
The rising number of COVID-19 cases is causing some concern as we move closer to opening schools, colleges and universities. The risk of no large gatherings (we can’t imagine a fall without high school, Buckeyes, Browns and Bengals football) could cause a severe economic blow to all of the businesses that rely on conferences, concerts, sporting events and other large group gatherings.
Take Cedar Point for example, while they just reopened to limited guests and under severe restrictions, they would normally be drawing between 25,000 to 35,000 people a day during the summer months. The 3+ million people that normally make an annual trek to Sandusky will be significantly diminished during the 120+ day season. To top it off, several employees tested positive for COVID-19 in the first week of reopening.
All of this being reported, we anticipate it will result in a negative economic impact to local businesses that rely on tourists to fuel increased seasonal sales thus likely creating revenue, income and payroll reductions, premium audits and possible reductions.
While Ohio has many advantages in the COVID-19 pandemic, it is clear that we are not yet on stable economic ground and should prepare for more uncertainty.
This article is a compilation of information from Gongwer News Service and JobsOhio.