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CB or PGR: Which P&C Insurance Stock Should You Hold Now?
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The Zacks Property and Casualty Insurance industry is well poised for growth banking on the strength of better pricing, an improving rate environment, exposure growth, prudent underwriting and a solid capital position. However, an active catastrophe environment could weigh on the upside.
The industry continues to witness better pricing. Global commercial insurance prices rose for 22 straight quarters though the magnitude has slowed down over the last nine 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.
The insurance industry is rate sensitive. The Fed has made three hikes in 2023, taking the tally to 10 since March 2022. However, at its recently concluded FOMC meeting, the committee paused further rate hikes for the time being despite high inflation. The Fed hinted at another increase by 2023 end. Companies that have locked in high interest rates are bound to generate higher yields at this point.
Catastrophic events weigh on the underwriting profitability of insurers. 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 first quarter of 2023 witnessed economic losses from catastrophes of about $63 billion, per a report from Aon. Nonetheless, analysts at Swiss Re Institute expect combined ratio to improve to 100% in 2023 and 98.5% in 2024.
The insurance industry continues to witness accelerated digitalization. Players are investing heavily in technology to improve scale and efficiencies.
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. Policyholders’ surplus totaled $952.4 billion at 2022 end per a report published in Insurance Journal.
The industry has gained 6% year to date compared with the Finance sector’s increase of 4.9%. The Zacks S&P 500 composite has risen 17.1% in the said time frame.
Image Source: Zacks Investment Research
Here we focus on two property and casualty insurers, namely Chubb Limited (CB - Free Report) and The Progressive Corporation (PGR - Free Report) . Chubb, with a market capitalization of $79.6 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. Progressive, with a market capitalization of $77 billion, is a leading independent agency writer of private passenger auto coverage and the market leader in motorcycle insurance products. 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 1.3% year to date against Chubb’s decline of 13.4%.
Return on Equity (ROE)
PGR has a return on equity of 14%, which is more than Chubb’s ROE of 13.1% and the industry average of 6.9%.
Dividend Yield
Chubb’s dividend yield of 1.8% tops PGR’s dividend yield of 0.3% and the industry average of 0.4%.
Debt-to-Equity
Progressive’s debt-to-equity ratio of 36.5 is higher than the industry average of 24.5 as well as Chubb’s reading of 29.8.
Growth Projection
The Zacks Consensus Estimate for PGR’s 2023 earnings indicates a 28.3% increase from the year-ago reported figure, while that for CB implies a 15.4% increase.
The consensus estimate for PGR’s 2024 earnings indicates a 50.9% increase from the year-ago reported figure, while that for CB suggests a 10.3% rise.
The expected long-term earnings growth rate is pegged at 25.1% for PGR, better than the industry average of 13.3% and CB’s 10% earnings growth rate.
Estimate Revision
The Zacks Consensus Estimate for CB’s 2023 and 2024 EPS has moved 0.3% and 0.5% north in the past 30 days. The consensus estimate for PGR’s 2023 EPS has moved 2.4% down while the same for 2024 did not witness any revision in the past 30 days.
Combined Ratio
Combined ratio represents the underwriting profitability of an insurer. CB’s combined ratio deteriorated 200 bps on a year-over-year basis to 86.3% in the first quarter of 2023 while the same for PGR was 99, down 450 bps year over year.
To Conclude
Our comparative analysis shows that CB has the edge over PGR with respect to leverage, dividend yield, estimates revision and combined ratio. PGR outpaces CB on price performance, growth projection and return on equity.
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CB or PGR: Which P&C Insurance Stock Should You Hold Now?
The Zacks Property and Casualty Insurance industry is well poised for growth banking on the strength of better pricing, an improving rate environment, exposure growth, prudent underwriting and a solid capital position. However, an active catastrophe environment could weigh on the upside.
The industry continues to witness better pricing. Global commercial insurance prices rose for 22 straight quarters though the magnitude has slowed down over the last nine 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.
The insurance industry is rate sensitive. The Fed has made three hikes in 2023, taking the tally to 10 since March 2022. However, at its recently concluded FOMC meeting, the committee paused further rate hikes for the time being despite high inflation. The Fed hinted at another increase by 2023 end. Companies that have locked in high interest rates are bound to generate higher yields at this point.
Catastrophic events weigh on the underwriting profitability of insurers. 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 first quarter of 2023 witnessed economic losses from catastrophes of about $63 billion, per a report from Aon. Nonetheless, analysts at Swiss Re Institute expect combined ratio to improve to 100% in 2023 and 98.5% in 2024.
The insurance industry continues to witness accelerated digitalization. Players are investing heavily in technology to improve scale and efficiencies.
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. Policyholders’ surplus totaled $952.4 billion at 2022 end per a report published in Insurance Journal.
The industry has gained 6% year to date compared with the Finance sector’s increase of 4.9%. The Zacks S&P 500 composite has risen 17.1% in the said time frame.
Image Source: Zacks Investment Research
Here we focus on two property and casualty insurers, namely Chubb Limited (CB - Free Report) and The Progressive Corporation (PGR - Free Report) . Chubb, with a market capitalization of $79.6 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. Progressive, with a market capitalization of $77 billion, is a leading independent agency writer of private passenger auto coverage and the market leader in motorcycle insurance products. 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 1.3% year to date against Chubb’s decline of 13.4%.
Return on Equity (ROE)
PGR has a return on equity of 14%, which is more than Chubb’s ROE of 13.1% and the industry average of 6.9%.
Dividend Yield
Chubb’s dividend yield of 1.8% tops PGR’s dividend yield of 0.3% and the industry average of 0.4%.
Debt-to-Equity
Progressive’s debt-to-equity ratio of 36.5 is higher than the industry average of 24.5 as well as Chubb’s reading of 29.8.
Growth Projection
The Zacks Consensus Estimate for PGR’s 2023 earnings indicates a 28.3% increase from the year-ago reported figure, while that for CB implies a 15.4% increase.
The consensus estimate for PGR’s 2024 earnings indicates a 50.9% increase from the year-ago reported figure, while that for CB suggests a 10.3% rise.
The expected long-term earnings growth rate is pegged at 25.1% for PGR, better than the industry average of 13.3% and CB’s 10% earnings growth rate.
Estimate Revision
The Zacks Consensus Estimate for CB’s 2023 and 2024 EPS has moved 0.3% and 0.5% north in the past 30 days. The consensus estimate for PGR’s 2023 EPS has moved 2.4% down while the same for 2024 did not witness any revision in the past 30 days.
Combined Ratio
Combined ratio represents the underwriting profitability of an insurer. CB’s combined ratio deteriorated 200 bps on a year-over-year basis to 86.3% in the first quarter of 2023 while the same for PGR was 99, down 450 bps year over year.
To Conclude
Our comparative analysis shows that CB has the edge over PGR with respect to leverage, dividend yield, estimates revision and combined ratio. PGR outpaces CB on price performance, growth projection and return on equity.