Shares of Chubb Ltd. and Goosehead Insurance Inc spiked this week after second-quarter earnings reports that exceeded consensus estimates and continued upward trends.
Chubb in the second quarter posted a year-over-year net income jump of 50.7% to $1.79 billion and its shares responded, rising more than 5% since the multiline insurer's earnings call.
Piper Sandler analyst Paul Newsome noted that Chubb's operating earnings rose less steeply, though acceleration in commercial pricing generated a lot of excitement.
"We essentially went through a kind of inflection point, where investors thought maybe the underwriting margins would be essentially flat or even down prospectively, to, well, they might actually improve prospectively," Newsome said.
It was widely expected to see property insurance rates rise at a faster pace than losses, the Piper Sandler analyst said, although some other lines were not expected to fare as well.
"It seemed like casually and specialty lines basically held with the rate of increases and then property lines are accelerating," he said.
Goosehead also saw its shares rally after announcing its quarterly results. The broker has been among the best-performing insurance stocks in 2023, rising 92.9% since Jan 3, 2023.
The strong quarter assuaged some investor doubts, Newsome said, and Goosehead remains a rapidly growing company.
"I think it was a continuation of what we saw in the first quarter," he said. "The fear that revenue growth would slow or even sort of disappear because of the housing market slowing just kind of didn't happen."
Goosehead also benefited from an aggressive sales force restructuring plan, Newsome said, with the broker imposing strict sales goals for its employees and laying off underperforming sales agents.
Not all insurance companies have fared well in the second quarter, with The Progressive Corp., for instance, posting fairly large losses. The insurer's stock was down 5.9% since it released its second-quarter figures on July 13.
The S&P 500 fared well and rose by 1.01% for the week ending July 28 and hit 4,582.23 by market close. The S&P 500 US Insurance index fared about as well, rising a modest 0.34% to 592.47 during the same period.
Expected Medicaid headwinds yet to be felt
The annual process by which states determine which low-income individuals qualify for government-subsidized healthcare was delayed for nearly three years due to the COVID-19 pandemic. After resuming in April, the process has been marred by differences in schedules from state to state. The Centers for Medicare & Medicaid Services has paused the process in at least six states.
Molina Healthcare Inc. and Centene Corp. both announced earnings during this week and downplayed Medicaid redetermination concerns.
Data suggests that about 66% of Medicaid disenrollment were procedural rather than due to verification of ineligibility, Molina CFO Mark Keim said during a July 27 earnings presentation. Many members are likely to be reconnected to Medicaid programs, he said.
Centene posted Medicaid membership growth during the second quarter, and CEO Sarah London said on a July 28 earnings call that the process continues to meet expectations.
"Given the recent news that [the Centers for Medicare & Medicaid Services] is requiring certain states to pause redeterminations and reinstate members who were dropped for procedural reasons, we will be closely tracking any impact this may have on the membership slope over the next few months," London said.
After receiving bumps midweek, Molina and Centene's stocks fell 5.34% and 6.3%, respectively, from the week prior and were trading at $301.46 and $66.18 by the end of trading Friday.