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TRV or ALL: Which P&C Insurance Stock Has an Edge Now?
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Improving pricing, prudent underwriting, increased exposure, streamlined operations, global presence and a solid capital position have helped the Zacks Property and Casualty Insurance industry perform well so far. The industry has increased 9.2% in the last six months versus the Finance sector’s increase of 9% and the Zacks S&P 500 Composite’s rise of 6.1%.
The performance of non-life insurers is affected by occurrences of catastrophes. Per reports in Gallagher Re, total economic losses were estimated at $290 billion for the first nine months of 2023. AM Best reports a total net underwriting loss of $24.5 billion in the first half of 2023, much higher than the $6.6 billion incurred in the year-ago period, largely attributable to rising loss costs, above-average catastrophe activity, and adverse trends in personal auto. The combined ratio was 104.5 for the same time frame per the credit rating giant, to which catastrophe losses added 960 basis points.
Global commercial insurance prices rose for 24 straight quarters, though the magnitude has slowed down, per Marsh Global Insurance Market Index. Better pricing ensures improved premiums, thus easing claims payment.
Better pricing, along with increased exposure and prudent underwriting, should drive higher premiums. AM Best states that premiums for the U.S. P&C industry, net of reinsurance, grew 9.7% in the first six months of 2023. Per Deloitte Insights, gross premiums are estimated to increase about six-fold to $722 billion by 2030. China and North America should account for more than two-thirds of the global market, per the report.
The insurance industry is a beneficiary of the rising rate environment. The Fed made four hikes in 2023, taking the tally to 11 since March 2022. Long-tail insurers are poised to benefit more.
Industry players remain focused on digitalization to improve scale and efficiencies. While a solid policyholders’ surplus will help the industry absorb losses, a sturdy capital level supports inorganic expansion, investment in growth initiatives and capital payout to shareholders.
Industry's Price Perfromanve Vs Sector and Zacks S&P 500 Composite
Image Source: Zacks Investment Research
Here, we focus on two property and casualty insurers, namely The Travelers Companies, Inc. (TRV - Free Report) and The Allstate Corporation (ALL - Free Report) . Travelers Companies, with a market capitalization of $41.8 billion, provides a wide variety of property and casualty insurance and surety products and services to businesses, organizations and individuals in the United States and select international markets. Allstate Corporation, with a market capitalization of $36.3 billion, is the third-largest property-casualty (P&C) insurer and the largest publicly-held personal lines carrier in the United States. 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
Allstate has gained 8.2% in the past six months versus Travelers’ gain of 4.7% and the industry’s increase of 7.7%.
Return on Equity (ROE)
Travelers has a return on equity of 10.4%, which exceeds Allstate’s ROE of -11% and the industry average of 7.2%.
Dividend Yield
Allstate’s dividend yield of 2.6% exceeds Travelers’ dividend yield of 2.2% and the industry average of 0.3%.
Debt-to-Equity
Allstate’s debt-to-equity ratio of 55 is higher than the industry average of 24 as well as Travelers’ reading of 40.2.
Growth Projection
The Zacks Consensus Estimate for 2024 earnings indicates a 51.1% increase from the year-ago reported figure for TRV and 728.5% for ALL.
The expected long-term earnings growth rate is pegged at 10.2% for TRV, while that for ALL is 7% with a Growth Score of B.
Combined Ratio
The combined ratio represents the underwriting profitability of an insurer. TRV’s combined ratio was 101 in the last reported quarter, while the same for ALL was 103.
Net Margin
TRV’s proforma net margin for the trailing 12 months was 5.6%, higher than ALL’s reading of -2.8%.
To Conclude
Our comparative analysis shows that TRV has the edge over ALL with respect to return on equity, combined ratio, net margin and leverage. ALL outpaces TRV on price performance, growth projection and dividend yield.
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TRV or ALL: Which P&C Insurance Stock Has an Edge Now?
Improving pricing, prudent underwriting, increased exposure, streamlined operations, global presence and a solid capital position have helped the Zacks Property and Casualty Insurance industry perform well so far. The industry has increased 9.2% in the last six months versus the Finance sector’s increase of 9% and the Zacks S&P 500 Composite’s rise of 6.1%.
The performance of non-life insurers is affected by occurrences of catastrophes. Per reports in Gallagher Re, total economic losses were estimated at $290 billion for the first nine months of 2023. AM Best reports a total net underwriting loss of $24.5 billion in the first half of 2023, much higher than the $6.6 billion incurred in the year-ago period, largely attributable to rising loss costs, above-average catastrophe activity, and adverse trends in personal auto. The combined ratio was 104.5 for the same time frame per the credit rating giant, to which catastrophe losses added 960 basis points.
Global commercial insurance prices rose for 24 straight quarters, though the magnitude has slowed down, per Marsh Global Insurance Market Index. Better pricing ensures improved premiums, thus easing claims payment.
Better pricing, along with increased exposure and prudent underwriting, should drive higher premiums. AM Best states that premiums for the U.S. P&C industry, net of reinsurance, grew 9.7% in the first six months of 2023. Per Deloitte Insights, gross premiums are estimated to increase about six-fold to $722 billion by 2030. China and North America should account for more than two-thirds of the global market, per the report.
The insurance industry is a beneficiary of the rising rate environment. The Fed made four hikes in 2023, taking the tally to 11 since March 2022. Long-tail insurers are poised to benefit more.
Industry players remain focused on digitalization to improve scale and efficiencies. While a solid policyholders’ surplus will help the industry absorb losses, a sturdy capital level supports inorganic expansion, investment in growth initiatives and capital payout to shareholders.
Industry's Price Perfromanve Vs Sector and Zacks S&P 500 Composite
Image Source: Zacks Investment Research
Here, we focus on two property and casualty insurers, namely The Travelers Companies, Inc. (TRV - Free Report) and The Allstate Corporation (ALL - Free Report) . Travelers Companies, with a market capitalization of $41.8 billion, provides a wide variety of property and casualty insurance and surety products and services to businesses, organizations and individuals in the United States and select international markets. Allstate Corporation, with a market capitalization of $36.3 billion, is the third-largest property-casualty (P&C) insurer and the largest publicly-held personal lines carrier in the United States. 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
Allstate has gained 8.2% in the past six months versus Travelers’ gain of 4.7% and the industry’s increase of 7.7%.
Return on Equity (ROE)
Travelers has a return on equity of 10.4%, which exceeds Allstate’s ROE of -11% and the industry average of 7.2%.
Dividend Yield
Allstate’s dividend yield of 2.6% exceeds Travelers’ dividend yield of 2.2% and the industry average of 0.3%.
Debt-to-Equity
Allstate’s debt-to-equity ratio of 55 is higher than the industry average of 24 as well as Travelers’ reading of 40.2.
Growth Projection
The Zacks Consensus Estimate for 2024 earnings indicates a 51.1% increase from the year-ago reported figure for TRV and 728.5% for ALL.
The expected long-term earnings growth rate is pegged at 10.2% for TRV, while that for ALL is 7% with a Growth Score of B.
Combined Ratio
The combined ratio represents the underwriting profitability of an insurer. TRV’s combined ratio was 101 in the last reported quarter, while the same for ALL was 103.
Net Margin
TRV’s proforma net margin for the trailing 12 months was 5.6%, higher than ALL’s reading of -2.8%.
To Conclude
Our comparative analysis shows that TRV has the edge over ALL with respect to return on equity, combined ratio, net margin and leverage. ALL outpaces TRV on price performance, growth projection and dividend yield.