Progressive shares rise amid monthly earnings; Chubb ticks down after settlement

Property and casualty companies will have to contend with losses from a rare and particularly devastating series of tornadoes that hit the central U.S. in mid-December. However, the impact seems likely only to somewhat dampen fourth-quarter results.

The broader markets moved down during the week ending Dec. 18, with the S&P 500 slipping 1.94% to 4,620.64.

A tornado outbreak that ripped through a number of states on Dec. 10 and 11 may generate record losses for an event of that type. Given the damage caused to homes, businesses, vehicles and farms, as well as the lives lost, the storm system will very likely be viewed as "historic," according to Kentucky Farm Bureau Federation CEO John Sparrow.

Total economic losses from the storms could reach $18 billion, AccuWeather CEO Joel Myers estimated, which would make this the costliest tornado outbreak in U.S. history.

Insured losses from the tornadoes in Kentucky could be about $3 billion, CFRA analyst Cathy Seifert said in an email. The storms will be an earnings event rather than a balance sheet event for insurers because commercial lines pricing has continued to firm, she added.

"The combination of supply-chain driven inflation and heavy catastrophe losses will likely push up rates for auto and homeowners coverage in 2022, as carriers seek to recoup some of these losses through higher rates," Seifert said.

This type of weather event is not typical in the U.S., Fitch Ratings said. December is usually the least costly month of the year for U.S. convective storm insured losses.

"The tornadoes will likely drive insurance industry natural catastrophe losses to the largest annual total in the U.S. since the 2017 record year," the rating agency said.

Also in the property and casualty space, The Progressive Corp. this week reported that net income attributable to the company for November was $195.2 million. The company logged total pretax net realized losses on securities of $99.1 million, compared to gains of $459.6 million for November 2020.

Piper Sandler analyst Paul Newsome said in a note that the monthly results were encouraging as Progressive showed improvement in its underlying ratio, demonstrating that it is moving quickly to lower expenses and improve underwriting results in the wake of rising claims inflation.

Barclays analyst Tracy Benguigui raised the price target on Progressive to $82 from $81 based on higher book value but reiterated an underweight rating.

Progressive's shares climbed 6.22% on the week.

Other notable P&C insurers turning in positive sessions were The Allstate Corp., up 5.67%, and The Travelers Cos. Inc., up 2.55%.

Chubb Ltd. took a major step in easing concerns about a major piece of outstanding litigation as it announced an agreement in principle to cover its financial responsibility for sexual abuse claims facing the Boy Scouts of America. Chubb, which will receive a broad release for all of its companies from such claims in the future, will pay $800 million as part of the settlement agreement.

The insurer's stock was up for most of the week, but was caught up in a sell-off on the final day of trading and closed down 0.89%.