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P&C Insurers Brace for Yet Another Active Hurricane Season

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Like 2020, this year is also expected to see a very active hurricane season. Per Colorado State University (CSU), 2021 above-average hurricane season may have 17 named storms, including eight hurricanes and four major hurricanes. This year’s hurricane season could be about 140% of average season per CSU.

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 help insurers withstand blows from the catastrophe events.

Per a report published by Swiss Re Institute, global insured catastrophe losses incurred in 2020 were $83 billion, which made it the fifth-costliest year. The report further stated that natural catastrophes accounted for $76 billion of global insured losses, an increase of 40% from 2019 level. The private U.S. P&C insurance industry thus witnessed 27.5% decline in net income while net underwriting gains plummeted 94.4% in the first nine months of 2020 per a report from Verisk. However, policyholders’ surplus increased 1.9% to $863.3 billion as of Sep 30, 2020, driven by growth in the stock market, per the report.

Per a report published in Carrier Management, AM Best noted that combined ratio deteriorated only 70 basis points to 98.7 in the first nine months of 2020.

Coming back to this year’s Atlantic hurricane season, The National Oceanic and Atmospheric Administration (NOAA) predicts that there’s a 60% chance of an above-normal hurricane season, a 30% chance of a near-normal season, and a 10% chance of a below-normal season. Nonetheless, improved pricing prepares the insurers to weather the catastrophe loss.

As per Marsh, global commercial insurance prices in the first quarter of 2021 increased 18%, marking the 14th straight quarter of price increase. Per the report, property rates increased 15%, casualty pricing rose 6%, U.S. financial and professional lines pricing increased 40% while cyber insurance pricing rose 35%. Per Willis Towers Watson’s 2021 Insurance Marketplace Realities report, except for one, 29 lines should witness price rise.

Also, frequent occurrences of natural disasters should accelerate the policy renewal rate.

The first quarter of 2021 witnessed the wrath of winter storms Uri and Viola. Per reports in Reinsurance News, catastrophe risk modeller AIR Worldwide estimated industry loss of more than $10 billion from the storms. Subsequently, catastrophe risk modelling specialist Karen Clark & Company updated insurance and reinsurance market loss estimate from winter storm Uri in the United States to about $18 billion.

Stocks in Focus

Frequent catastrophes that accelerate policy renewal rate and lead to upward pricing pressure will boost performance of Zacks Property and Casualty Insurance industry players. With the help of our Zacks Stock Screener, we have selected seven stocks that carry a favorable Zacks Rank and have witnessed upward estimate revisions.

Allstate Corporation ALL is the third-largest property-casualty insurer and the largest publicly-held personal lines carrier in the United States. Estimates for its 2021 bottom line have jumped over the past seven days by 8.2%, and suggest a 5.5% increase from the year-ago reported number. This Zacks Rank #3 (Hold) insurer carries an impressive VGM Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Berkshire Hathaway BRK.B owns more than 90 subsidiaries in insurance, rail roads, utilities, manufacturing services, retail and home building. Estimates for this Zacks Rank #2 (Buy) insurer’s 2021 bottom line have jumped over the past 30 days by 2.1%, and suggest a 18.8% increase from the year-ago reported number.

Cincinnati Financial Corporation CINF markets property and casualty insurance. Estimates for this Zacks Rank #2 insurer’s 2021 bottom line have jumped over the past 30 days by 3.5%, and suggest a 25.3% increase from the year-ago reported number.

Chubb Limited CB is one of the world’s largest providers of P&C insurance and reinsurance. It has diversified through acquisitions into many specialty lines and also provides specialized insurance products. Estimates for its 2021 bottom line have jumped over the past 30 days by 0.5% and suggest a 56.1% increase from the year-ago reported number. This Zacks Rank #3  insurer carries an favorable VGM Score of B.

Everest Re Group RE writes property and casualty, reinsurance and insurance in the United States, Bermuda and international markets. Estimates for 2021 bottom line have jumped over the past seven days by about 9%, and suggest a 243.4% increase from the year-ago reported number. This Zacks Rank #3 insurer carries an impressive VGM Score of A.

Alleghany Corporation Y engages in property and casualty reinsurance and insurance businesses in the United States and internationally. Estimates for its 2021 bottom line have jumped over the past 30 days by 18.9%, and suggest a 221% increase from the year-ago reported number. This Zacks Rank #2 insurer carries a favorable VGM Score of B.

Selective Insurance Group SIGI offers insurance products and services across the United States. Estimates for its 2021 bottom line have jumped over the past 30 days by 15.1%, and suggest a 28.9% increase from the year-ago reported number. This Zacks Rank #3 insurer carries a favorable VGM Score of B.

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Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
 
The Allstate Corporation (ALL) : Free Stock Analysis Report
 
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
 
Everest Re Group, Ltd. (RE) : Free Stock Analysis Report
 
Chubb Limited (CB) : Free Stock Analysis Report
 
Selective Insurance Group, Inc. (SIGI) : Free Stock Analysis Report
 
Alleghany Corporation (Y) : Free Stock Analysis Report
 
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