The top U.S. property and casualty insurers are forecast to paint a mixed earnings picture when they disclose third-quarter results.
Among the largest public U.S. P&C companies, sell-side analysts expect nine to report year-over-year earnings gains, while eight are projected to record declines. Sequentially, earnings are mostly expected to be down, according to an analysis by S&P Global Market Intelligence.
Revenues, on the other hand, are anticipated to grow year over year for all the companies included in this analysis, with the exception of American Financial Group Inc., Markel Corp., Cincinnati Financial Corp. and Old Republic International Corp.
Reporting ahead of the rest of the industry, Progressive Corp. reported third-quarter net income attributable to the company of $841.7 million, or $1.42 per share, down 9% year over year from $928.4 million, or $1.57 per share. The company did see policies in force climb year over year across the board, while net premiums written rose 12% to $9.62 billion.
Sandler O'Neill analyst Paul Newsome in a note to clients said the P&C segment saw a relatively average quarter for catastrophe losses. Insurers with business in coastal states with exposed to Hurricane Dorian will probably have the most-significant catastrophe losses, he said. Meyer Shields, an analyst at Keefe Bruyette & Woods, said the most likely earnings "surprises" will come from noncatastrophe weather losses or reserve development.
Details on the magnitude of commercial insurance price increases should be a major focus for earnings calls. Those increases mostly accelerated in the period, particularly in specialty lines, thanks to falling underwriting margins, deteriorating loss trends and subdued interest rates, Shields said. Janney Montgomery Scott's Larry Greenberg said the uptrend in commercial lines pricing is expected to continue for the rest of the year and through 2020.
Analysts will also be keen to hear details about casualty loss trends amid an increase in class-action lawsuits and rising attorney involvement in claims process, as well discussion regarding interest rate sensitivities. Declining interest rates stand to boost P&C insurers' book value growth, though Newsome pointed out that they could also start to negatively impact net investment income.