US P&C Q4 2023 earnings to benefit from personal lines 'turnaround'

Most of the largest publicly traded US property and casualty insurers are expected to report better earnings on both sequential and year-over-year bases for the fourth quarter of 2023.

An S&P Global Market Intelligence analysis finds that of the 20 largest P&C and multiline insurers by total assets that trade on major US exchanges, 15 are expected by sell-side analysts to record higher earnings year over year, while 16 should see earnings rise compared to the third quarter of 2023.

Analysts also project that 15 property and casualty (P&C) underwriters are expected to record year-over-year improvements in revenues.

Private auto driving personal lines results

Pricing strategy will continue to be a focal point during this earnings season, as will the health of personal lines, according to Keefe Bruyette & Woods analyst Meyer Shields. Private auto "turned the corner" when third-quarter 2023 results were up compared with a year earlier, Shields said in an interview, which could lead to an easing of sizable rate-hike requests.

"The [personal lines] industry is experiencing something of a turnaround in profitability," the KBW analyst said. "So [insurers] are saying, 'We need to keep raising rates, but now we only need to raise rates just to keep pace with inflation instead of to close the gap because underlying results look better.'"

Personal lines will show year-over-year improvements in underlying loss ratios and margin expansion in personal auto will continue as earned rate increases improve and loss trends moderate, UBS analyst Brian Meredith said in a note.

"This should drive improved earnings visibility and help alleviate capital concerns driving continued re-rating for the group," Meredith said.

The Allstate Corp., which has reported a net loss in each of the last six quarters, is expected to garner particular attention as there is an expectation that its claim trends are improving, said CFRA Research analyst Cathy Seifert.

"People are going to be looking at their results to see if expectations are going to be met because the stock has moved up nicely in the last couple of months in anticipation of that," Seifert said in an interview.

Arch Capital Group Ltd. and Old Republic International Corp. are the only companies in this analysis expected to see earnings deteriorate sequentially and year over year. Assurant Inc., AXIS Capital Holdings Ltd. and Assured Guaranty Ltd. will be down compared to the previous quarter, while Markel Group Inc. and American Financial Group Inc. will be down from a year ago, according to sell-siders.

Revenues are forecast to be lower both sequentially and year over year for Kemper Corp., Old Republic and Assured Guaranty. Markel and Cincinnati Financial Corp. are expected to show decreases from last year, while American International Group Inc., Chubb Ltd., The Progressive Corp., The Hanover Insurance Group Inc., Allstate, American Financial and Arch Capital are projected to show lower revenues compared to the third quarter.

Recovering ratios

A benign fourth quarter in terms of catastrophes provided a welcome respite for insurers' combined ratios. Analysts project 10 P&C insurers, including The Travelers Cos. Inc. and Allstate, will see sequential and year-over-year improvement in that metric.

The quiet quarter, which had only one event that caused at least $1 billion in losses, closed out a year that had a record 28 events with losses exceeding the $1 billion mark. The National Centers for Environmental Information reported that, when combined, those events generated a record $92.8 billion in losses.

A significant portion of Allstate's expected underlying combined ratio improvement should come from its personal lines business, Piper Sandler analyst Paul Newsome said in a note. Price increases "should have significantly outpaced underlying claims inflation given the rapid price increases seen industrywide," he added.