latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/inflation-war-to-weigh-on-some-p-c-insurers-q1-results-despite-firm-pricing-69874097 content esgSubNav
In This List

Inflation, war to weigh on some P&C insurers' Q1 results despite firm pricing

Blog

Banking Essentials Newsletter: September 18th Edition

Blog

Navigating the New Canadian Derivatives Landscape: Key Changes and Compliance Steps for 2025

Loan Platforms: Securing settlement instructions and prioritising the user experience

Blog

Getting an Edge with Services: Driving optimization by embracing technological innovation


Inflation, war to weigh on some P&C insurers' Q1 results despite firm pricing

Global catastrophe events, persistent claim cost inflation and the impacts of the war in Ukraine may offset a strong pricing environment and a year-over-year rise in demand for property and casualty insurance.

Thirteen of the top 19 largest publicly traded U.S. P&C insurers are expected to post sequentially lower EPS in the first quarter, according to an S&P Global Market Intelligence examination of sell-side analyst forecasts. Only six are projected to see year-over-year declines. Old Republic International Corp.'s EPS is expected to remain unchanged year over year.

Uneven results forecast

SNL Image

CFRA Research analyst Cathy Seifert projects a "mixed" first-quarter earnings season across the P&C space. Investors will probably focus on the impact of claims cost inflation and the ongoing war in Ukraine, Seifert said in a note. Insurers with exposure to the conflict will likely seek to provide investors with more visibility about how they could be impacted by the war, Seifert said.

Domestic insurers stand to benefit from lower-than-normal catastrophic activity in the U.S., said Wells Fargo analyst Elyse Greenspan. But reinsurers may be hit by higher levels of catastrophe losses elsewhere in the world. The Wells Fargo analyst projects catastrophe losses driven by global events, including European windstorms, a Japanese earthquake and flooding in Australia, to be around $12 billion.

Commercial lines insurers are expected to continue to see underlying margin improvement, while personal lines insurers are still seeing loss trends that exceed pricing levels, Greenspan added.

UBS analyst Brian Meredith sees The Allstate Corp., Arch Capital Group Ltd. and W. R. Berkley Corp. setting the tone for the season, with Arch Capital potentially on course to beat expectations on stronger growth and margin improvement. The Hartford Financial Services Group Inc. was among the least-favored P&C insurers, according to the UBS report.

Travelers' Q1 net income rises, losses getting tough to predict

SNL Image

The Travelers Cos. Inc. was the first P&C insurer to report financial results for the period, posting first-quarter net income of $1.02 billion, or $4.15 per share, up from $733 million, or $2.87 per share, a year earlier.

Loss costs are "more difficult than ever to predict," as the war in Ukraine rages, on top of domestic exposures, such as inflationary pressures, regulatory uncertainty and weather severity, Travelers CEO Alan Schnitzer said during an April 19 earnings call. CFO Dan Frey also warned that the loss trend assumption was inching closer to 6%.

Revenues across the P&C industry are estimated to rise year over year for more than half of the largest insurers. Sequentially, 10 companies in this analysis are expected to see revenue increases.

This analysis was limited to the 20 largest P&C and multiline insurers by total assets that are traded on major U.S. exchanges. Total assets were based on GAAP filings as of April 15. The analysis excludes Berkshire Hathaway Inc. and Loews Corp. given their sizable operations outside the insurance space, and American National Group Inc., for which estimates were not available.