4 P&C Insurers to Buy for Solid Returns in the Hurricane Season
It’s going to be a near-average hurricane season this year per Colorado State University (CSU). The latest report published by CSU states that the 2023 hurricane season may have 15 named storms, including seven hurricanes and three major hurricanes.
The hurricane season typically starts in June and lasts through November during a year, gathering strength in August and September. Thus, property and casualty insurers’ third-quarter results are affected the most.
Better pricing, prudent underwriting, increased exposure, favorable reserve development and a solid capital position are likely to help RLI Corporation RLI, HCI Group HCI, AXIS Capital Holdings Limited AXS and Kinsale Capital Group, Inc. KNSL withstand blows from catastrophe events.
Last year, Aon had estimated a global economic loss of $313 billion from natural disasters, while insured losses were estimated to be more than $130 billion. Per a report published in Insurance Journal, net underwriting loss increased seven-fold to $26.9 billion in 2022. Per Verisk and APCIA, the combined ratio deteriorated 310 basis points year over year to 102.7% in 2022.
Net income declined 33.6% in 2022 to $41.2 billion while losses and loss adjustment expenses increased 14.1% per Verisk and the American Property Casualty Insurance Association. Also, policyholders’ surplus decreased 4.8% to $952.4 billion as of Dec 31, 2022.
Coming back to this year, in the first quarter of 2023, economic losses from catastrophes could be about $63 billion, per a report from Aon. Nonetheless, improved pricing places insurers well to weather catastrophe loss, while frequent occurrences of natural disasters should accelerate the policy renewal rate.
Global commercial insurance prices rose for 22 straight quarters though the magnitude has slowed down, per Marsh Global Insurance Market Index. First-quarter 2023 pricing increased 4%. Better pricing will help insurers write higher premiums. Per Deloitte Insights, trends like commercial lines witnessing growth at a faster pace than personal lines and homeowners’ premiums improving better than personal auto are likely to continue in 2023.
Our Picks
Frequent catastrophes that accelerate policy renewal rates and lead to upward pricing pressure will boost the performance of Zacks Property and Casualty Insurance industry players. With the help of the Zacks Stock Screener, we have selected four stocks that carry a favorable Zacks Rank and have witnessed upward estimate revisions.
RLI is a specialty property-casualty underwriter that caters primarily to niche markets and is one of the industry’s most profitable P&C writers with an impressive track record of delivering 26 consecutive years of underwriting profitability. A broad range of product offerings, focus on specialty insurance lines, business expansion, sustained rate increase, expanded distribution and operational strength bode well for this Zacks Rank #1 (Strong Buy) insurer’s growth. You can see the complete list of today’s Zacks #1 Rank stocks here.
Estimates for its 2023 bottom line have jumped over the past seven days by 3.7% and suggest a 7.9% increase from the year-ago reported number.
HCI Group, a Zacks Rank #1 Florida-focused insurance business, has been growing its homeowners business, acquiring profitable books of business, proactively managing risk and loss costs and deploying excess capital into investments and growth initiatives. The insurer has built on an investment portfolio, which it believes will generate $30 million in interest income on an annualized basis with a low-risk profile.
Estimates for HCI’s 2023 bottom line have jumped 22.7% over the past 30 days and suggest a 149.3% increase from the year-ago reported number. The insurer carries an impressive VGM Score of A.
Axis Capital Holdings is a leading specialty insurer and a global reinsurer, aiming leadership in specialty risks. The company’s focus on building Specialty Insurance, Reinsurance as well as Accident and Health insurance portfolio, its strong market presence, better pricing, margin expansion and effective capital deployment should drive growth. This Zacks Rank #2 (Buy) insurer remains focused on business lines that are likely to provide solid double-digit ROE opportunities.
Estimates for AXS’ 2022 bottom line have risen 4.9% over the past 60 days and suggest a 33.2% increase from the year-ago reported number. Its expected long-term earnings growth is pegged at 5%.
Kinsale Capital Group offers various insurance and reinsurance products across all 50 states of the United States, the District of Columbia, the Commonwealth of Puerto Rico and the U.S. Virgin Islands. This Zacks Rank #1 insurer is poised for long-term growth, given its continued focus on the E&S market, improved revenues, solid underwriting results and effective capital deployment measures.
Estimates for Kinsale Capital’s 2023 bottom line have moved 2.4% north over the past seven days, implying a 36.2% increase from the year-ago reported number. It has a Growth Score of B.
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RLI Corp. (RLI) : Free Stock Analysis Report
Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
HCI Group, Inc. (HCI) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
