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3 P&C Insurers Stand to Gain From Higher Fixed-Income Yields
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Key Takeaways
The Fed raised its target range by 25 basis points to 3.75-4%, supporting insurers' investment income.
Shorter-duration portfolios can reinvest maturing securities at higher yields more quickly.
Higher investment income may cushion P&C insurers as pricing growth moderates and competition increases.
The Zacks Property and Casualty Insurance industry is placed within the top 29% of the 247 Zacks industries. It currently carries a Zacks Industry Rank #71. Among U.S. P&C insurers, the Sept. 16, 2026, Federal Reserve rate hike is most relevant to companies with large fixed-income portfolios, meaningful reinvestment opportunities and strong recurring investment income. The benefit is expected to build over time as bonds mature and are reinvested at higher yields.
The Federal Reserve raised the federal funds target range by 25 basis points to 3.75-4%, its first-rate hike since July 2023, citing still-elevated inflation. The move provides an incremental tailwind to insurers’ investment income, although the impact will not be immediate across their entire portfolios.
Investment income receives the most direct benefit from higher interest rates. P&C insurers maintain substantial bond and fixed-income portfolios because premiums are collected before claims are paid, creating investable funds. As securities mature and operating cash is reinvested, insurers can deploy funds at higher prevailing yields. This gradually lifts net investment income (NII), with the benefit depending on portfolio size, asset mix, duration and the pace of reinvestment.
The rate hike is particularly relevant for insurers with shorter-duration investment portfolios. More frequent maturities allow these companies to replace older, lower-yielding securities with higher-yielding investments sooner. Consequently, shorter portfolio duration can enable insurers to translate changes in market interest rates into higher NII more quickly than insurers with longer-duration portfolios.
Higher interest rates can also help offset softer P&C insurance pricing. As pricing growth moderates and competition increases, premium growth and underwriting margins may face greater pressure. Higher investment yields can provide an earnings cushion by increasing NII, particularly for insurers with substantial fixed-income portfolios and significant near-term reinvestment opportunities. Thus, while the full benefit of the Sept. 16 rate hike will emerge gradually, the higher-rate environment can support overall profitability as insurers continue to reinvest premiums, claims reserves and maturing securities at more attractive yields.
Price Performance
The insurance industry has returned 3.6% in the past year compared with the Finance sector’s growth of 7.3% and the Zacks S&P 500 composite’s appreciation of 15.8%.
Image Source: Zacks Investment Research
3 Insurers to Watch
Among U.S. P&C insurers, The Travelers Companies, Inc. (TRV - Free Report) , Selective Insurance Group, Inc. (SIGI - Free Report) and RLI Corp. (RLI - Free Report) are among the companies with meaningful sensitivity to interest rates, given their large fixed-income portfolios and ability to reinvest maturing securities at prevailing yields.
Travelers is sensitive to the Fed’s rate hike because of its large fixed-income portfolio and substantial reinvestment needs. As of June 30, 2026, Travelers had $92.9 billion in fixed-maturity investments, with an average effective duration of five years, while about 25% of its fixed-maturity portfolio is expected to mature over the next three years. This creates a significant opportunity to reinvest maturing securities at higher yields following the Fed’s rate hike. The benefit is already visible in results, where in the second quarter of 2026 net investment income rose 14% to $1.07 billion, with fixed-maturity NII increasing 12% to $930 million, primarily because of higher long-term average yields and a larger investment base. Travelers also expects after-tax fixed-income NII of approximately $840 million in the third quarter and $870 million in the fourth quarter of 2026, based partly on higher reinvestment yields. Thus, the rate hike should support TRV’s investment income over time, although higher rates can also reduce the market value of its existing bonds and temporarily pressure accumulated other comprehensive income and book value.
The Zacks Consensus Estimate for The Travelers’ 2026 earnings per share indicates a year-over-year increase of 22.6%. The consensus estimate for 2027 revenues indicates an increase of 2.9% from the 2026 estimates.
The consensus estimate for 2026 and 2027 has moved 9.8% and 3% north, respectively, in the past 60 days. Earnings have grown 19.2% in the past five years. The expected long-term earnings growth rate is pegged at 4.4%. TRV delivered a four-quarter average earnings surprise of 41.68%. Shares of TRV have rallied 34.4% in the past year.
Selective Insurance is sensitive to the Fed’s rate hike because of its large fixed-income investment portfolio. As of Dec. 31, 2025, SIGI’s fixed-income portfolio, including short-term investments, had an effective duration of 4.1 years, meaning higher interest rates can reduce the market value of existing bonds but also allow the company to reinvest maturing securities and new operating cash flows at higher yields. SIGI itself notes that rising rates can benefit new and reinvested money even as they pressure the fair value of existing fixed-income investments. This reinvestment benefit is already evident in its results; after-tax NII increased 18% year over year to $119 million in the second quarter of 2026, and first-half NII rose 18% to $232.3 million, prompting SIGI to raise its 2026 after-tax NII guidance to $480 million from $465 million.
The Zacks Consensus Estimate for Selective Insurance’s 2026 earnings per share indicates a year-over-year increase of 9.9%. The consensus estimate for revenues is pegged at $5.46 billion, implying a year-over-year improvement of 2.4%.
The consensus estimate for 2027 earnings and revenues indicates an increase of 7.8% and 0.4%, respectively, from the 2026 estimates. Earnings have grown 8.3% in the past five years. SIGI earnings surpassed estimates in two of the last four quarters and missed in two, with the average surprise being 5.23%. SIGI shares have risen 12.1% in the past year.
RLI is meaningfully sensitive to the Fed’s rate hike through its investment portfolio and reinvestment income. RLI had about $4.87 billion of investments and cash as of June 30, 2026, with bonds accounting for roughly 80% of its target asset allocation and an average fixed-income duration of 4.7 years. This 4.7-year duration creates a balance between reinvestment upside and bond-price sensitivity, meaning a sustained higher-rate environment could support NII while creating some pressure on reported book value. The Fed’s 25-basis-point hike to 3.75-4.% should allow RLI to reinvest maturing securities and growing operating cash flows at higher yields, supporting further growth in net investment income over time.
The Zacks Consensus Estimate for RLI’s 2026 revenues is pegged at $1.86 billion, implying a year-over-year improvement of 4.8%. The consensus estimate for 2027 revenues indicates an increase of 1.5% from the 2026 estimate. RLI earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 18.03%. Shares of the insurer have lost 8.8% in the past year.
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3 P&C Insurers Stand to Gain From Higher Fixed-Income Yields
Key Takeaways
The Zacks Property and Casualty Insurance industry is placed within the top 29% of the 247 Zacks industries. It currently carries a Zacks Industry Rank #71. Among U.S. P&C insurers, the Sept. 16, 2026, Federal Reserve rate hike is most relevant to companies with large fixed-income portfolios, meaningful reinvestment opportunities and strong recurring investment income. The benefit is expected to build over time as bonds mature and are reinvested at higher yields.
The Federal Reserve raised the federal funds target range by 25 basis points to 3.75-4%, its first-rate hike since July 2023, citing still-elevated inflation. The move provides an incremental tailwind to insurers’ investment income, although the impact will not be immediate across their entire portfolios.
Investment income receives the most direct benefit from higher interest rates. P&C insurers maintain substantial bond and fixed-income portfolios because premiums are collected before claims are paid, creating investable funds. As securities mature and operating cash is reinvested, insurers can deploy funds at higher prevailing yields. This gradually lifts net investment income (NII), with the benefit depending on portfolio size, asset mix, duration and the pace of reinvestment.
The rate hike is particularly relevant for insurers with shorter-duration investment portfolios. More frequent maturities allow these companies to replace older, lower-yielding securities with higher-yielding investments sooner. Consequently, shorter portfolio duration can enable insurers to translate changes in market interest rates into higher NII more quickly than insurers with longer-duration portfolios.
Higher interest rates can also help offset softer P&C insurance pricing. As pricing growth moderates and competition increases, premium growth and underwriting margins may face greater pressure. Higher investment yields can provide an earnings cushion by increasing NII, particularly for insurers with substantial fixed-income portfolios and significant near-term reinvestment opportunities. Thus, while the full benefit of the Sept. 16 rate hike will emerge gradually, the higher-rate environment can support overall profitability as insurers continue to reinvest premiums, claims reserves and maturing securities at more attractive yields.
Price Performance
The insurance industry has returned 3.6% in the past year compared with the Finance sector’s growth of 7.3% and the Zacks S&P 500 composite’s appreciation of 15.8%.
Image Source: Zacks Investment Research
3 Insurers to Watch
Among U.S. P&C insurers, The Travelers Companies, Inc. (TRV - Free Report) , Selective Insurance Group, Inc. (SIGI - Free Report) and RLI Corp. (RLI - Free Report) are among the companies with meaningful sensitivity to interest rates, given their large fixed-income portfolios and ability to reinvest maturing securities at prevailing yields.
TRV carries a Zacks Rank #2 (Buy), while SIGI and RLI have a Zacks Rank #3 (Hold) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Travelers is sensitive to the Fed’s rate hike because of its large fixed-income portfolio and substantial reinvestment needs. As of June 30, 2026, Travelers had $92.9 billion in fixed-maturity investments, with an average effective duration of five years, while about 25% of its fixed-maturity portfolio is expected to mature over the next three years. This creates a significant opportunity to reinvest maturing securities at higher yields following the Fed’s rate hike. The benefit is already visible in results, where in the second quarter of 2026 net investment income rose 14% to $1.07 billion, with fixed-maturity NII increasing 12% to $930 million, primarily because of higher long-term average yields and a larger investment base. Travelers also expects after-tax fixed-income NII of approximately $840 million in the third quarter and $870 million in the fourth quarter of 2026, based partly on higher reinvestment yields. Thus, the rate hike should support TRV’s investment income over time, although higher rates can also reduce the market value of its existing bonds and temporarily pressure accumulated other comprehensive income and book value.
The Zacks Consensus Estimate for The Travelers’ 2026 earnings per share indicates a year-over-year increase of 22.6%.
The consensus estimate for 2027 revenues indicates an increase of 2.9% from the 2026 estimates.
The consensus estimate for 2026 and 2027 has moved 9.8% and 3% north, respectively, in the past 60 days. Earnings have grown 19.2% in the past five years. The expected long-term earnings growth rate is pegged at 4.4%. TRV delivered a four-quarter average earnings surprise of 41.68%. Shares of TRV have rallied 34.4% in the past year.
Selective Insurance is sensitive to the Fed’s rate hike because of its large fixed-income investment portfolio. As of Dec. 31, 2025, SIGI’s fixed-income portfolio, including short-term investments, had an effective duration of 4.1 years, meaning higher interest rates can reduce the market value of existing bonds but also allow the company to reinvest maturing securities and new operating cash flows at higher yields. SIGI itself notes that rising rates can benefit new and reinvested money even as they pressure the fair value of existing fixed-income investments. This reinvestment benefit is already evident in its results; after-tax NII increased 18% year over year to $119 million in the second quarter of 2026, and first-half NII rose 18% to $232.3 million, prompting SIGI to raise its 2026 after-tax NII guidance to $480 million from $465 million.
The Zacks Consensus Estimate for Selective Insurance’s 2026 earnings per share indicates a year-over-year increase of 9.9%. The consensus estimate for revenues is pegged at $5.46 billion, implying a year-over-year improvement of 2.4%.
The consensus estimate for 2027 earnings and revenues indicates an increase of 7.8% and 0.4%, respectively, from the 2026 estimates.
Earnings have grown 8.3% in the past five years. SIGI earnings surpassed estimates in two of the last four quarters and missed in two, with the average surprise being 5.23%. SIGI shares have risen 12.1% in the past year.
RLI is meaningfully sensitive to the Fed’s rate hike through its investment portfolio and reinvestment income. RLI had about $4.87 billion of investments and cash as of June 30, 2026, with bonds accounting for roughly 80% of its target asset allocation and an average fixed-income duration of 4.7 years. This 4.7-year duration creates a balance between reinvestment upside and bond-price sensitivity, meaning a sustained higher-rate environment could support NII while creating some pressure on reported book value. The Fed’s 25-basis-point hike to 3.75-4.% should allow RLI to reinvest maturing securities and growing operating cash flows at higher yields, supporting further growth in net investment income over time.
The Zacks Consensus Estimate for RLI’s 2026 revenues is pegged at $1.86 billion, implying a year-over-year improvement of 4.8%. The consensus estimate for 2027 revenues indicates an increase of 1.5% from the 2026 estimate. RLI earnings surpassed estimates in three of the last four quarters and missed in one, the average surprise being 18.03%. Shares of the insurer have lost 8.8% in the past year.