5 Property & Casualty Insurers to Buy as Pricing Improves

Industry Overview - The Zacks Property and Casualty Insurance (P&C) industry is expected to benefit from improved pricing, prudent underwriting, and exposure growth despite rising catastrophic activities [1] - The industry comprises companies providing commercial and personal property insurance, casualty insurance products, and services, with premiums being the primary revenue source [3] - The Federal Reserve's interest rate hikes in 2023 are favorable for insurers, particularly long-tail insurers [3] Pricing and Performance Trends - Although premium pricing is increasing, the rate of increase has slowed over the last 12 quarters [2] - Global commercial insurance prices have risen for 25 consecutive quarters, which is expected to help insurers manage claims effectively [4] - Analysts predict a 5.5% growth in premiums for 2024, with gross premiums estimated to reach $722 billion by 2030 [4] Catastrophe Impact - The P&C insurance industry is vulnerable to catastrophe events, which negatively impact underwriting profits [5] - In 2023, total economic losses were $380 billion, with insured losses at $118 million, leading to a net underwriting loss of $38 billion, the highest in a decade [5] - The combined ratio for the industry was 103.7, with catastrophe losses contributing significantly to this figure [5] Mergers and Acquisitions - The industry is likely to see continued consolidation as companies seek to diversify operations and gain market share [6] - Deloitte anticipates more mergers and acquisitions in the reinsurance space in 2024 [6] Technology Adoption - Increased adoption of technology, including blockchain, AI, and advanced analytics, is transforming the industry and improving operational efficiency [6][7] - The emergence of insurtech is creating competition for traditional insurers, necessitating significant investment in technology [7] Industry Performance and Valuation - The Zacks Property and Casualty Insurance industry ranks 34, placing it in the top 13% of over 250 Zacks industries, indicating positive earnings outlook [8] - The industry has outperformed the S&P 500 and Finance sector over the past year, with a collective stock increase of 26.6% [9] - The current price-to-book (P/B) ratio for the industry is 1.44X, significantly lower than the S&P 500's 6.25X [11] Company Highlights - The Progressive Corporation: Expected earnings growth of 50.7% and 14.1% for 2024 and 2025, respectively, with a strong market position [13] - AXIS Capital Holdings: Anticipated earnings growth of 3.1% and 10.1% for 2024 and 2025, with a high dividend yield [15] - Berkshire Hathaway: Expected earnings growth of 7.7% and 15.3% for 2024 and 2025, benefiting from its diversified operations [16] - The Travelers Companies: Projected earnings growth of 34.7% and 13.8% for 2024 and 2025, with a strong capital position [17] - Chubb: Expected earnings growth of 10.5% for 2025, with a focus on middle-market businesses [18]