25 Jul, 2023
Kemper, Allstate among P&C carriers with highest price-to-estimated EPS ratios
By Hassan Javed and Tom Jacobs
Weaker earnings at a number of property and casualty insurers have led to sharply increased price-to-estimated earnings ratios, according to an S&P Global Market Intelligence analysis.
The analysis, which was limited to companies deriving the bulk of their revenue from property and casualty (P&C) insurance that trade on the NYSE or Nasdaq, shows that publicly traded US P&C insurers had a median price-to-estimated full-year 2023 earnings multiple of 14.6x at the close of the second quarter. The median for the top 15 insurers was 17.7x.
The top 15 P&C companies in the analysis had a combined one-year total return of 4.9%, while the industry had a negative return of 0.4%.
Kemper's ratio soars; Kinsale drops out of 1st
Kemper Corp., with a price-to-estimated full-year earnings ratio of 475.8x at the end of the second quarter, was the most richly valued insurer among those listed on major US exchanges. According to analyst projections, the company should provide a 3.2% total return over the course of a year.
The Allstate Corp. also logged a considerable increase in its price-to-estimated 2023 earnings ratio, which soared to 48.9x and pushed it into the second position.
Kinsale Capital Group Inc. was at the top of the P&C charts last quarter with a price-to-estimated 2023 earnings ratio of 31.0x. Despite falling a couple places in the rankings by the end of the second quarter, the company's ratio actually increased to 35.6x.
Because the company is "a low-cost operator," it allows investors to achieve "a little bit better returns," Kinsale CEO Michael Kehoe said during an S&P Global Market Intelligence webinar July 18. Kehoe attributed Kinsale's recent success to the "really strong growth" of the excess and surplus (E&S) market in which it operates.
Kehoe said E&S markets historically offered "better growth prospects and better margins," trends he said have accelerated over the last half-decade.
"There's been an enormous amount of new capital that's come into the industry [and] companies that have been around a long time that have expanded into E&S," Kehoe said. "There are probably over 20 relatively new companies in the fronting business, many of them focus on E&S."
State regulators are also more lenient on E&S writers compared to primary carriers when it comes to rate increases, he said.
"I would think E&S writers tend to be a little bit more entrepreneurial, a little bit more focused on returns," Kehoe said. "If the states were to get in the way of generating an adequate return on capital, you would see the market dry up in pretty quick order, and so I think that's the ultimate safeguard."
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– – Learn more about the 2022 US personal lines P&C performance rankings. |
Primerica remains atop life chart
Primerica Inc., like the previous quarter, was the most expensive US life carrier, with a price-to-estimated full-year earnings multiple of 12.9x. The insurer also posted the strongest result in terms of one-year total return at 67.8%.
Aflac Inc., Principal Financial Group Inc. and Globe Life Inc. were the three other public life insurance companies selling at more than 10 times their expected 2023 EPS forecasts at the end of the second quarter.
Overall, the analysts predict that the life industry's median EPS will climb 19.3% year over year in 2023.
