Growth should be a key point of discussion heading into earnings season as a majority of the largest publicly traded US property and casualty insurers are expected to report year-over-year increases in both earnings and revenues for the first quarter.

An S&P Global Market Intelligence analysis found that of the 20 largest property and casualty (P&C) and multiline insurers by total assets that trade on major US exchanges, 19 are expected by sell-side analysts to record higher earnings per share year over year, while 17 are expected to record improvement in revenues compared with the first quarter of 2023.

With profitability concerns easing, the tone on first-quarter calls should shift from rate increases to growth, said Piper Sandler analyst Paul Newsome.

"Insurers have taken these big increases, so the discussion will shift from getting more rate to whether they can grow," Newsome said in an interview. "Nobody is trying to grow when they're trying to regain profitability. So I guess you'll see a shift in the discussion."

A pivot to growth?

Insurers in the P&C sector, particularly those in the personal auto lines, experienced a turnaround in the fourth quarter of 2023 as ratios improved and rate increases sought to combat claims cost inflation started earning in.

The Allstate Corp. made a splash by reporting net income before taxes of $1.83 billion compared with a net loss before taxes of $410 million in the fourth quarter of 2022, its first positive net profit since the first quarter of 2022.

Newsome said he expects "a lot more company-specific questions" about growth strategies, such as where they are planning to expand and how it will be done, along with questions on distribution channels and advertising and marketing spend.

During its fourth-quarter 2023 earnings call, The Progressive Corp. revealed its attitude on growth when President and CEO Tricia Griffith said the company is looking at "unraveling" a number of its nonrate and underwriting actions as well as increasing its ad spend.

Looking at the results Progressive released for the first quarter, there are already indications that the insurer is "definitely getting growth," said CFRA Research analyst Cathy Seifert, citing a 7% increase in policies in force, a top-line premium growth approaching 20% and a combined ratio of 86.1%.

"It's certainly an encouraging trend for an underwriter like Progressive to pursue growth," Seifert said in an interview. "They've ... got their ducks in a row."

Commercial concerns over maritime, geopolitical tensions

While investors will be looking for continued pricing optimism from commercial insurers, the heightened tension in the Middle East and the bridge collapse in Baltimore will also be on the agenda for those calls.

Although not a natural catastrophe, the collapse of the Francis Scott Key Bridge on March 26 has the potential to be the largest marine insured loss in history, said JMP Securities analyst Matt Carletti. He wrote in a note that the cost of the disaster would likely exceed the $1.5 billion loss from the grounding and sinking of liner Costa Concordia in 2012.

"[The collapse] will likely be an identifiable impact on the quarterly results of several companies as we expect the losses to be well-syndicated throughout the marine (re)insurance marketplace," Carletti wrote, adding that he had reflected estimated losses in first-quarter EPS estimates where participation in the loss was likely.

"Technically the bridge collapse happened in the first quarter, which means that insurers should book what they feel is their expected loss from the event in the first-quarter results," Piper Sandler's Newsome said. "But because the loss was at the very end of the quarter, it is possible that insurers decide to book it in the second quarter.

While Chubb Ltd. has been mentioned as a provider of insurance on the bridge, Newsome said the majority of the coverage is likely to be incurred by reinsurers.

Despite not occurring in the first quarter, the escalation in tensions between Iran and Israel will be on the minds of commercial investors, Seifert of CFRA Research said.

Between Russia's invasion of Ukraine and the Israel-Hamas war, there has been "an elevated geopolitical risk environment for a couple of years now," Seifert said. "But the latest wrinkle between Israel and Iran is likely to be a factor on investors' minds as it relates to some of the trade credit, certainly shipping, things like that."

Ratios

Underwriting performance benefited from another quarter of low catastrophe losses as 14 of the 20 insurers, including The Travelers Cos. Inc., American International Group Inc. and Kemper Corp., are expected to show year-over-year improvement in their combined ratios. The sequential numbers were not as upbeat, with only five including Arch Capital Group Ltd., Markel Group Inc. and The Hartford Financial Services Group Inc. slated to show improvement compared with the fourth quarter of 2023.

There were two billion-dollar severe weather events during the quarter: a system that spawned a tornado outbreak in Florida and the Carolinas and evolved into a wind storm that hit the East Coast in January, and a severe weather event with hail and tornadoes that struck the South and the Midwest in March.