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AXS or SIGI: Which P&C Insurer Should You Stay Invested In?

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Increased exposure, higher retention, streamlined operations, better pricing, solid underwriting and a strong capital position have helped the Zacks Property and Casualty Insurance industry perform well. The industry has gained 15.1% year to date, outperforming the Zacks S&P 500 composite’s rise of 12.6% and the Finance sector’s increase of 4.4%.  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. Colorado State University (CSU) estimates an active hurricane season this year at about 170% of the average season. According to AM Best, cat loss is estimated to contribute 680 basis points to the expected combined ratio of 100.7 in 2024, while Swiss Re projects the combined ratio to improve from the 2023 level to 98.5% in 2024.

An increase in catastrophe activities induces higher pricing. Global commercial insurance prices rose for 26 straight quarters, increasing 1% in the first quarter of 2024, per Marsh Global Insurance Market Index. Improved pricing drives higher premiums, ensuring smooth claims settlement. Swiss Re estimates premiums to grow 7% in 2024 and 4.5% in 2025. Per Fitch Ratings, personal auto is likely to perform better than other lines of business, thus aiding in better premiums.

The insurance industry benefits from an improved rate environment. Long-tail insurers are poised to benefit more.

The industry is also witnessing accelerated digitalization to improve scale and efficiency. While a solid policyholders’ surplus helps the industry absorb losses, a sturdy capital level supports inorganic expansion, investment in growth initiatives and distribution of wealth to shareholders.

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Here, we focus on two property and casualty insurers, namely Selective Insurance Group (SIGI - Free Report) and Axis Capital Holdings Limited (AXS - Free Report) .

Selective Insurance, with a market capitalization of $5.7 billion, offers insurance products and services across the United States. Axis Capital, with a market capitalization of $6.1 billion, provides a broad range of specialty insurance and reinsurance solutions to its clients on a worldwide basis. The companies carry a Zacks Rank #3 (Hold) 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

AXS has gained 31% year to date versus SIGI’s decline of 5.3%.  The industry has risen 15.1% in the said time frame.  

Return on Equity

AXS has a return on equity (“ROE”) of 19.1%, which is higher than SIGI’s ROE of 13.7% and the industry average of 7.8%. ROE measures how efficiently a company utilizes shareholders’ funds to generate profit.

Return on Invested Capital

Axis Capital’s return on invested capital (“ROIC”) of 11.1% betters the industry average of 5.9% and Selective Insurance’s ROIC of 8%. ROIC measures a company’s efficiency in utilizing funds to generate income.

Dividend Yield

AXS’s dividend yield of 2.4% exceeds the industry average of 0.3% and SIGI’s dividend yield of 1.5%.

Debt-to-Equity Ratio

Axis Capital’s debt-to-equity ratio of 34.4 is higher than the industry average of 21.7 as well as SIGI’s reading of 16.7.  

Growth Projection

The Zacks Consensus Estimate for AXS’s 2024 earnings indicates a 2.5% increase from the year-ago reported figure, while that for SIGI implies a year-over-year increase of 16.6%.

The Zacks Consensus Estimate for AXS’s 2025 earnings indicates an 8.9% increase from the year-ago reported figure, while that for SIGI implies a year-over-year increase of 19.5%.

Combined Ratio

AXS’s combined ratio was 91.1in the first quarter of 2024 lower than SIGI’s reading of 98.2% in the same period. Combined ratio measures the underwriting profitability of an insurer.

Net Margin

Axis Capital’s proforma net margin for the trailing 12 months was 10.3%, higher than SIGI’s reading of 8.1%.

To Conclude

Our comparative analysis shows that AXS has the edge over SIGI with respect to price performance, ROE, ROIC, dividend yield, combined ratio and net margin. SIGI outpaces AXS in terms of leverage and growth projection.

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