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Zacks Industry Outlook Highlights Chubb, The Progressive, Kinsale Capital, RLI and NMI Holdings

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For Immediate Release

Chicago, IL – July 6, 2023 – Today, Zacks Equity Research discusses Chubb Ltd. (CB - Free Report) , The Progressive Corp. (PGR - Free Report) , Kinsale Capital Group Ltd. (KNSL - Free Report) , RLI Corp. (RLI - Free Report) and NMI Holdings (NMIH - Free Report) .

Industry: Property & Casualty Insurance


The Zacks Property and Casualty Insurance (P&C) industry is likely to benefit from better pricing, prudent underwriting and exposure growth. Industry players like Chubb Ltd., The Progressive Corp., Kinsale Capital Group Ltd., RLI Corp. and NMI Holdings are poised to grow despite a rise in catastrophic activities. Given an active catastrophe environment, the policy renewal rate should accelerate. Also, the increasing adoption of technology and the emergence of insurtech will help in the smooth functioning of the industry players.

Though the industry is witnessing a rate increase, the magnitude has decreased in the last nine quarters. Nonetheless, an improvement in surplus and accelerated economic activities set the stage for a better M&A environment.

About the Industry

The Zacks Property and Casualty Insurance industry comprises companies that provide commercial and personal property insurance, and casualty insurance products and services. Such insurance helps to safeguard property in case of any natural or man-made disasters. Liability coverages are also provided by some industry players. The insurance coverage offered also includes automobiles, professional risk, marine, excess casualty, aviation, personal accident, commercial multi-peril, and professional indemnity and surety.

Premiums are the primary source of revenues for these insurers. These companies invest a portion of premiums to meet their commitments to policyholders. Though the Fed paused rate hikes recently, it indicated increases in the year ahead. An improving rate environment is a boon for insurers, especially long-tail insurers.

4 Trends Shaping the Future of the Property and Casualty Insurance Industry

Improved pricing to help navigate claims: Catastrophes are a concern for insurers due to the high degree of losses incurred. Insurers implement price hikes to ensure uninterrupted claims payment. Global commercial insurance prices rose for 22 straight quarters, per Marsh Global Insurance Market Index. Better pricing will help insurers write higher premiums and address claims payment prudently.

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. Per Deloitte Insights, gross premiums are estimated to increase sixfold to $722 billion by 2030. China and North America should account for more than two-thirds of the global market, per the report. Analysts at Swiss Re Institute predict premiums to grow 7.5% in 2023 and 5.5% in 2024.

Catastrophe loss induces volatility in underwriting profits: The P&C insurance industry is susceptible to catastrophe events, which drag down underwriting profits. The latest report published by CSU states that the 2023 hurricane season may have 15 named storms, including seven hurricanes and three major hurricanes. Catastrophic events weigh on the underwriting profitability of insurers.

Nonetheless, analysts at Swiss Re Institute expect the combined ratio to improve to 100% in 2023 and 98.5% in 2024. The first quarter of 2023 witnessed economic losses from catastrophes of about $63 billion, per a report from Aon. However, exposure growth, better pricing, prudent underwriting and favorable reserve development will help withstand the blow. Also, frequent occurrences of natural disasters should accelerate the policy renewal rate.

Merger and acquisitions: Consolidation in the property and casualty industry is likely to continue as players look to diversify their operations into new business lines and geography. Buying businesses along the same lines will also continue as players look to gain market share and grow in their niche areas. With a sturdy capital level, the industry is witnessing a number of mergers, acquisitions and consolidations.

Increased adoption of technology: The industry is witnessing increased use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation that expedite business operations and save cost. The industry has also witnessed the emergence of insurtech — technology-led insurers — creating competition for incumbent players.

The focus of insurtech is mainly on the property and casualty insurance industry. Accelerated digitalization has become the need of the hour and insurers continue to invest heavily in technology to improve basis points, scale and efficiencies. As insurtechs use the latest technologies and concepts that the incumbents are just beginning to experiment with, there remains a huge market risk. Also, it poses cyber threats.

Zacks Industry Rank Indicates Dull Prospects

The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates poor prospects in the near term. The Zacks Property and Casualty Insurance industry, which is housed within the broader Zacks Finance sector, currently carries a Zacks Industry Rank #171, which places it in the bottom 32% of more than 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry's positioning in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Earnings estimates have decreased 12.4% quarter to date.

Before we present a few property and casualty stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock-market performance and valuation picture.

Industry Outperforms S&P 500 and Sector

The Property and Casualty Insurance industry has outperformed both the Zacks S&P 500 composite as well as its sector over the past year. The stocks in this industry have collectively risen 17.9% in a year compared with the Finance sector and the Zacks S&P 500 composite's increases of 8.7% and 15.7%, respectively.

Current Valuation

On the basis of the trailing 12-month price-to-book (P/B), which is commonly used for valuing insurance stocks, the industry is currently trading at 1.44X compared with the S&P 500's 5.96X and the sector's 3.25X.

Over the past five years, the industry has traded as high as 1.6X, as low as 0.97X and at the median of 1.39X.

5 Property and Casualty Insurance Stocks to Keep an Eye On

We are recommending one Zacks Rank #1 (Strong Buy) stock, two Zacks Rank #2 (Buy) stocks and two Zacks Rank #3 (Hold) stocks from the P&C Insurance industry. You can see the complete list of today's Zacks #1 Rank stocks here.

RLI Corporation: Peoria, IL-based RLI is a specialty property-casualty (P&C) underwriter that caters primarily to niche markets. This Zacks Rank #1 insurer is poised to grow on the strength of product diversification across the Casualty, Property and Surety segments, a wider distribution base in personal umbrella, rate increases and effective capital deployment.

The Zacks Consensus Estimate for RE's 2023 and 2024 bottom line suggests a year-over-year increase of 7.9% and 3.9%, respectively. The consensus estimate for 2023 and 2024 has moved 3.7% and 11.2% north in the past 30 days. RE delivered a four-quarter average earnings surprise of 43.50%.

Kinsale Capital Group: Richmond, VA-based Kinsale Capital 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. Its focus on the E&S market, which has been performing well due to improved margins and lower loss ratios, improving revenues, solid underwriting results, a proprietary technology platform and effective capital deployment, poises this Zacks Rank #2 insurer well for growth.

The Zacks Consensus Estimate for KNSL's 2023 and 2024 bottom line suggests a year-over-year increase of 36.2% and 21.4%, respectively. The estimates have moved up 2.4% for 2023 and 3.9% for 2024 in the past 30 days. It has a Growth Score of B. KNSL delivered a four-quarter average earnings surprise of 14.77%.

NMI Holdings: Emeryville, CA-based NMI, with a Zacks Rank #2, provides private mortgage insurance. NMI Holdings is set to grow on higher new primary insurance written, a strong mortgage origination market, increased private mortgage insurance penetration rates and improving risk-based capital ratio.

The Zacks Consensus Estimate for NMIH's 2023 bottom line suggests a year-over-year increase of 5.6% and 9.6%, respectively. NMIH delivered a four-quarter average earnings surprise of 5.95%.  

Progressive Corp.: This Mayfield, OH-based company is a leading auto insurer in the United States and has one of the largest auto insurance groups. PGR is the largest seller of motorcycle policies, a market leader in commercial auto insurance and one of the top 15 homeowner carriers based on premiums written. PGR's compelling product portfolio, leadership position, strength in both Vehicle and Property businesses, healthy policies in force and retention bode well for growth. PGR carries a Zacks Rank #3.

The Zacks Consensus Estimate for Progressive's 2023 and 2024 bottom line suggests a year-over-year increase of 28.3% and 51%, respectively. The expected long-term earnings growth rate is 25.1%, better than the industry average of 13.3%. It has a Growth Score of A.

Chubb: Based in Zurich, Switzerland, Chubb 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. This Zacks Rank #3 insurer is poised to benefit from its focus on capitalizing on the potential of middle-market businesses and strategic initiatives, which pave the way for long-term growth.

The Zacks Consensus Estimate for Chubb's 2023 and 2024 bottom line suggests a year-over-year increase of 15.9% and 10.3%, respectively. The expected long-term earnings growth rate is 10%. It has a VGM Score of B. CB delivered a four-quarter average earnings surprise of 4.71%.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit  for information about the performance numbers displayed in this press release.

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