Catastrophe losses driven by hurricanes Harvey, Irma and Maria are expected to have impacted earnings for almost all the largest property-and-casualty and multiline insurers during the third quarter.
Of the largest public P&C and multiline insurers, only two companies are projected to post higher earnings per share compared with the year-ago quarter, according to an S&P Global Market Intelligence analysis. Ameriprise Financial Inc. is the only company in this analysis that is also expected to see growth in EPS compared with the second quarter.
"The cat losses are going to dominate reported earnings," Morningstar analyst Brett Horn said in an interview, adding that this quarter will gear toward the high end of historical cat losses in a given period.
In an Oct. 10 note, FBR analyst Randy Binner said that his P&C quarterly EPS estimates are down 75% because of the three hurricanes and the Mexico earthquakes.
A number of insurers have already started reporting expected third-quarter catastrophe losses, with American International Group Inc. reporting the highest estimate at $3.1 billion.
Horn said Progressive Corp. will be interesting to follow this earnings season, as the company recently moved into homeowners insurance.
"This might be really their first experience with the volatility that homeowners [insurance] brings," the Morningstar analyst said. "Given the very high multiple that the stock trades at, I'm wondering if that may have some impact on the valuation if cat losses materially impair profitability for the quarter or for the year."
Janney analysts Robert Glasspiegel and Larry Greenberg said in an Oct. 9 note that they are "relatively confident" the catastrophe reinsurance market will have a "different feel" come Jan. 1, 2018, than it has in the past few years.
"We are debating not if, but by how much cat pricing will increase," they wrote. "We would not be surprised to see a gradual hardening in the commercial lines pricing as well. We would expect the auto and homeowners markets to remain relatively firm into 2018."
The Janney analysts noted that the property-and-casualty stocks in their coverage universe have lagged the broader market since late August. Everest Re Group Ltd and XL Group Ltd have been particularly weak, they added.
Morningstar's Horn noted that the direction of pricing will be a key question as companies begin to report third-quarter earnings. Catastrophe losses will not be large enough to "spur any major changes" in pricing, he said, with the possible exception of the reinsurance market. He called commercial pricing "very spotty" and said he expects it to remain very competitive.
"Recent quarters have maybe been a little bit of an inflection point for the industry in pricing and that's what I'm looking for, to see which way it breaks," Horn said.
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