We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
PGR or CB: Which P&C Insurance Stock is Better Placed?
Read MoreHide Full Article
Improved pricing, an increase in interest rate, exposure growth, prudent underwriting and solid capital position poise property and casualty insurers well amid a volatile market. However, an active catastrophe environment could weigh on the upside.
The insurance industry is rate sensitive. With the Fed raising rates five times this year itself, the favorable environment is a boon for long-tail P&C insurers. Notably, investment income is an important component of insurers’ top line.
P&C insurers’ profitability is likely to be weighed down by catastrophic events. Colorado State University (CSU) expects an active Atlantic hurricane season this year with 18 named storms. These include eight hurricanes and four major hurricanes. This year’s hurricane season could be about 120% of the average season per CSU. Swiss Re estimated $72 billion in economic losses from natural catastrophes, while insured losses were $35 billion in the first half of 2022.
Global commercial insurance prices rose for 19 straight quarters though the magnitude has slowed down over the last six quarters, per Marsh Global Insurance Market Index. Per Willis Towers Watson’s 2022 Insurance Marketplace Realities report, rates will continue to rise but by a small margin. Better pricing ensures improved premiums and prudent claims payment. Per Deloitte insights, global non-life premiums are estimated to grow 3.7% in 2022.
Given accelerated digitalization in the insurance space. Industry players are investing heavily in technology to improve scale and efficiencies. Per Deloitte Insights, the technology budget is projected to increase 13.7% in 2022.
While a solid policyholders’ surplus will help the industry absorb losses, a sturdy capital level continues to aid insurers in pursuing strategic mergers and acquisitions, investing in growth initiatives, engaging in share buybacks, increasing dividends or paying out special dividends.
The industry has declined 8.5% year to date compared with the Finance sector’s decrease of 22.5% and the Zacks S&P 500 composite’s decline of 24.8%.
Image Source: Zacks Investment Research
Here we focus on two property and casualty insurers, namely The Progressive Corporation (PGR - Free Report) and Chubb Limited (CB - Free Report) . Progressive, with a market capitalization of $72.2 billion, is one of the major auto insurers in the country and the largest seller of motorcycle policies. Chubb, with a market capitalization of $77.7 billion, is one of the world’s largest providers of property and casualty (P&C) insurance and reinsurance and the largest publicly traded P&C insurer. Both companies carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s now see how these P&C insurers have fared in terms of some of the key metrics.
Price Performance
Progressive has gained 20.3% year to date against Chubb’s decline of 3.9% and the industry’s decline of 8.5%.
Return on Equity (ROE)
PGR has a return on equity of 11.5%, which exceeds CB’s ROE of 11% and the industry average of 5.4%.
Dividend Yield
CB’s dividend yield of 1.8% tops the industry average of 0.4% as well as PGR’s reading of 0.3%.
Debt-to-Equity Ratio
CB’s debt-to-equity ratio of 37.2 is lower than PGR’s reading of 40.8. However, both compare unfavorably with the industry average of 25.3.
Earnings Surprise History
CB delivered a four-quarter average earnings surprise of 12.12%, while PGR delivered a four-quarter average negative earnings surprise of 15.30%.
Growth Projection
The Zacks Consensus Estimate for 2022 earnings indicates a 21.8% increase from the year-ago reported figure for CB and 4.8% for PGR.
The consensus estimate for 2023 earnings indicates an 11.9% increase from the year-ago reported figure for CB but a decline of 43.5% for PGR.
The long-term expected earnings growth is pegged at 10% for Chubb, which has a Growth Score of B.
PGR’s long-term expected earnings growth is pegged at 17.2%. It has a Growth Score of C.
Style Score
CB has a VGM Score of B, while PGR has a VGM Score of C.
Combined Ratio
The combined ratio signifies the underwriting profitability of an insurer and the same was 84 for CB and 95.6 for PGR.
To Conclude
Our comparative analysis shows that Chubb has the edge over PGR with respect to dividend yield, leverage, earnings surprise history, style score and combined ratio. PGR outpaces CB on parameters like price performance and return on equity.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
PGR or CB: Which P&C Insurance Stock is Better Placed?
Improved pricing, an increase in interest rate, exposure growth, prudent underwriting and solid capital position poise property and casualty insurers well amid a volatile market. However, an active catastrophe environment could weigh on the upside.
The insurance industry is rate sensitive. With the Fed raising rates five times this year itself, the favorable environment is a boon for long-tail P&C insurers. Notably, investment income is an important component of insurers’ top line.
P&C insurers’ profitability is likely to be weighed down by catastrophic events. Colorado State University (CSU) expects an active Atlantic hurricane season this year with 18 named storms. These include eight hurricanes and four major hurricanes. This year’s hurricane season could be about 120% of the average season per CSU. Swiss Re estimated $72 billion in economic losses from natural catastrophes, while insured losses were $35 billion in the first half of 2022.
Global commercial insurance prices rose for 19 straight quarters though the magnitude has slowed down over the last six quarters, per Marsh Global Insurance Market Index. Per Willis Towers Watson’s 2022 Insurance Marketplace Realities report, rates will continue to rise but by a small margin. Better pricing ensures improved premiums and prudent claims payment. Per Deloitte insights, global non-life premiums are estimated to grow 3.7% in 2022.
Given accelerated digitalization in the insurance space. Industry players are investing heavily in technology to improve scale and efficiencies. Per Deloitte Insights, the technology budget is projected to increase 13.7% in 2022.
While a solid policyholders’ surplus will help the industry absorb losses, a sturdy capital level continues to aid insurers in pursuing strategic mergers and acquisitions, investing in growth initiatives, engaging in share buybacks, increasing dividends or paying out special dividends.
The industry has declined 8.5% year to date compared with the Finance sector’s decrease of 22.5% and the Zacks S&P 500 composite’s decline of 24.8%.
Image Source: Zacks Investment Research
Here we focus on two property and casualty insurers, namely The Progressive Corporation (PGR - Free Report) and Chubb Limited (CB - Free Report) . Progressive, with a market capitalization of $72.2 billion, is one of the major auto insurers in the country and the largest seller of motorcycle policies. Chubb, with a market capitalization of $77.7 billion, is one of the world’s largest providers of property and casualty (P&C) insurance and reinsurance and the largest publicly traded P&C insurer. Both companies carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s now see how these P&C insurers have fared in terms of some of the key metrics.
Price Performance
Progressive has gained 20.3% year to date against Chubb’s decline of 3.9% and the industry’s decline of 8.5%.
Return on Equity (ROE)
PGR has a return on equity of 11.5%, which exceeds CB’s ROE of 11% and the industry average of 5.4%.
Dividend Yield
CB’s dividend yield of 1.8% tops the industry average of 0.4% as well as PGR’s reading of 0.3%.
Debt-to-Equity Ratio
CB’s debt-to-equity ratio of 37.2 is lower than PGR’s reading of 40.8. However, both compare unfavorably with the industry average of 25.3.
Earnings Surprise History
CB delivered a four-quarter average earnings surprise of 12.12%, while PGR delivered a four-quarter average negative earnings surprise of 15.30%.
Growth Projection
The Zacks Consensus Estimate for 2022 earnings indicates a 21.8% increase from the year-ago reported figure for CB and 4.8% for PGR.
The consensus estimate for 2023 earnings indicates an 11.9% increase from the year-ago reported figure for CB but a decline of 43.5% for PGR.
The long-term expected earnings growth is pegged at 10% for Chubb, which has a Growth Score of B.
PGR’s long-term expected earnings growth is pegged at 17.2%. It has a Growth Score of C.
Style Score
CB has a VGM Score of B, while PGR has a VGM Score of C.
Combined Ratio
The combined ratio signifies the underwriting profitability of an insurer and the same was 84 for CB and 95.6 for PGR.
To Conclude
Our comparative analysis shows that Chubb has the edge over PGR with respect to dividend yield, leverage, earnings surprise history, style score and combined ratio. PGR outpaces CB on parameters like price performance and return on equity.