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WRB or CINF: Which P&C Insurer Should You Buy Now?

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Increased exposure driving business growth, higher retention, streamlined operations, global presence, better pricing, solid underwriting and a strong capital position have helped the Zacks Property and Casualty Insurance industry perform well. The industry has risen 14.9% year to date, outperforming the Zacks S&P 500 composite’s rise of 7.9% and the Finance sector’s increase of 3.2%.

Per Fitch Ratings, an improved performance at personal auto, coupled with better investment results and lower claims, should fuel insurers' performance this year.

The performance of non-life insurers is affected by catastrophes. Per reports in Aon, total economic losses were $380 billion in 2023, while insured losses were $118 million. According to AM Best, total net underwriting loss was $38 billion in 2023, a 10-year high, largely attributable to weather-related losses, high inflation as well as reinsurance pricing pressure. The combined ratio was 103.7 for the same time frame per the credit rating giant, to which catastrophe losses added 780 basis points. The credit rating giant also estimates cat loss to contribute 680 basis points to the expected combined ratio of 100.7 in 2024.

An increase in catastrophe activities raises pricing. Global commercial insurance prices rose for 25 straight quarters, though the magnitude has slowed down, per Marsh Global Insurance Market Index. Improved pricing drives higher premiums, ensuring smooth claims settlement.

The insurance industry benefits from a 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. However, per Reuters, economists expect the Federal Reserve to go for a rate cut at its June meeting.

The industry is continually undergoing technological developments to improve scale and efficiencies. While a solid policyholders’ surplus helps the industry absorb losses, a sturdy capital level supports inorganic expansion, investment in growth initiatives and capital payout to shareholders.
 

Zacks Investment Research
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Here, we focus on two property and casualty insurers, namely W.R. Berkley Corp.  (WRB - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) .

W.R. Berkley, with a market capitalization of $21.9 billion, is one of the nation’s largest commercial lines property casualty insurance providers. Cincinnati Financial, with a market capitalization of $18.6 billion, markets property and casualty insurance. The companies carry a Zacks Rank #2 (Buy) each. 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 fare in terms of some of the key metrics.

Price Performance

W.R. Berkley has gained 20.9% year to date compared with CNA Financial’s gain of 15%.  The industry has risen 14.1% in the said time frame.  

Return on Equity

W.R. Berkley has a return on equity (“ROE”) of 19%, which exceeds Cincinnati Financial’s ROE of 8.6% and the industry average of 7.3%.

Dividend Yield

Cincinnati Financial’s dividend yield of 2.5% exceeds W.R. Berkley’s dividend yield of 0.5% and the industry average of 0.3%.

Debt-to-Equity Ratio

W.R. Berkley’s debt-to-equity ratio of 38 is higher than the industry average of 23.2 as well as Cincinnati Financial’s reading of 7.2.  

Growth Projection

The Zacks Consensus Estimate for WRB’s 2024 earnings indicates a 22% increase from the year-ago reported figure, while that for CINF implies a year-over-year increase of 2.5%.

The Zacks Consensus Estimate for WRB’s 2025 earnings indicates a 9.2% increase from the year-ago reported figure, while that for CINF implies a year-over-year increase of 10.8%.

The expected long-term earnings growth rate for WRB is 9%, while that for CINF is 15%.

Combined Ratio

Combined ratio represents the underwriting profitability of an insurer. WRB’s combined ratio for 2023 was 89.7, while the same for CINF was 94.9.

Net Margin

WRB’s proforma net margin for the trailing 12 months was 11.4%, higher than CINF’s reading of 18.4%.

To Conclude

Our comparative analysis shows that CINF has the edge over WRB with respect to dividend yield, leverage, net margin and growth projection. WRB outpaces CINF in terms of dividend, price performance, return on equity and combined ratio.


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W.R. Berkley Corporation (WRB) - free report >>

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