US P&C, multiline insurers to feel earnings pressure in Q2

Most of the largest U.S.-listed property and casualty and multiline insurers are expected to see EPS declines on sequential and yearly bases in the second quarter, according to an S&P Global Market Intelligence analysis.

Earnings declines expected

The five biggest P&C and multiline insurers — American International Group Inc., Chubb Ltd., The Travelers Cos. Inc., The Allstate Corp. and The Hartford Financial Services Group Inc. — are all projected to record lower EPS compared to the first quarter. Out of that group, only Chubb is expected to see earnings rise compared to the second quarter of 2021.

S&P Global Market Intelligence projects that the 2022 combined ratio of the U.S. P&C insurance industry will rise by about 0.9 of a percentage point on a year-over-year basis to 100.4%, even as the growth in direct premiums written approaches double-digits for a second straight year. Growth rates in commercial lines are expected to pull back from the 13.6% recorded in 2021, but any retreat will be mitigated by upward pressure on personal lines premiums.

Analysts expect the sixth-largest insurer in the group, The Progressive Corp., to post a sequential decline but also register a year-over-year increase. The insurer reported a second-quarter net loss of $542.9 million, or a loss of 94 cents per share, versus net income of $790.1 million, or $1.34 per share, a year earlier. Progressive recorded first-quarter net income of $313.9 million, or 52 cents per share.

For the second quarter, Progressive wrote down $224.8 million of goodwill assigned to its property segment, which was primarily related to the 2015 acquisition of ARX Holding Corp. There is no indication of impairment on the remaining $227.9 million of goodwill, which is primarily attributable to its personal lines agency business and related to the ARX acquisition.

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Better revenue picture

More than half of the insurers included in this analysis are forecast to notch revenue increases. Four of the top five are expected to post revenue gains for both the quarter and the last 12 months, with AIG expected to notch a sequential decline and The Hartford anticipated to record a yearly decline.

Keefe Bruyette & Woods analyst Meyer Shields anticipates pricing to be front and center when P&C insurers report results. An "awful lot of attention" will be paid to what Travelers, which reports ahead of most peers, says about pricing across the board, Shields said in an interview. The P&C giant is seen as "bellwether" with regard to loss trends as well, Shields added.