Published on 24 May 2024 on Zacks via Yahoo Finance
ACGL or ALL: Which P&C Insurance Stock Should You Buy Now?
Increased exposure, higher retention, streamlined operations, global presence, better pricing, solid underwriting and a strong capital position have helped the Zacks Property and Casualty Insurance industry perform well. The industry has risen 13% year to date, outperforming the Zacks S&P 500 composite’s rise of 10.8% and the Finance sector’s increase of 3.7%.Per Fitch Ratings, an improved performance at personal auto, coupled with better investment results and lower claims, should fuel insurers' performance this year.The performance of non-life insurers is affected by catastrophes. Per Aon’s Q1 Global Catastrophe Recap, total economic losses were more than $45 billion in the first quarter of 2024, while insured losses were $17 million, mostly driven by severe convective and winter storms in the United States, windstorms and flooding in Europe, and the Noto earthquake in Japan. According to AM Best, cat loss is estimated to contribute 680 basis points to the expected combined ratio of 100.7 in 2024.An increase in catastrophe activities induces higher pricing. Global commercial insurance prices rose for 26 straight quarters, increasing 1% in the first quarter of 2024. However, the magnitude has slowed down, per Marsh Global Insurance Market Index. Improved pricing drives higher premiums, ensuring smooth claims settlement.The insurance industry benefits from a rising rate environment. The Fed made four hikes in 2023, taking the tally to 11 since March 2022. Long-tail insurers are poised to benefit more. However, concerns over the Fed’s decision to cut rates loom.The industry is continually undergoing technological developments to improve scale and efficiency. While a solid policyholders’ surplus helps the industry absorb losses, a sturdy capital level supports inorganic expansion, investment in growth initiatives and distribution of wealth to shareholders.
Image Source: Zacks Investment Research