As the Q3 earnings season wraps, let’s dig into this quarter’s best and worst performers in the property & casualty insurance industry, including Skyward Specialty Insurance (NASDAQ: SKWD) and its peers.
Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.
The 33 property & casualty insurance stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 14.7%.
Thankfully, share prices of the companies have been resilient as they are up 6.2% on average since the latest earnings results.
Skyward Specialty Insurance (NASDAQ: SKWD)
Founded in 2006 to serve markets where standard insurance coverage falls short, Skyward Specialty Insurance (NASDAQ: SKWD) provides customized commercial property, casualty, and health insurance solutions for underserved or specialized market niches.
Skyward Specialty Insurance reported revenues of $382.5 million, up 27.1% year on year. This print exceeded analysts’ expectations by 14.3%. Overall, it was a stunning quarter for the company with an impressive beat of analysts’ net premiums earned estimates and a solid beat of analysts’ revenue estimates.
Skyward Specialty Chairman and CEO Andrew Robinson commented, “Our third quarter results were exceptional, extending our track record of profitable growth and double-digit returns. Gross written premiums grew more than 50%, we achieved a Company-best combined ratio of 89.2% and annualized return on equity of 19.3%. Five of our nine divisions grew by more than 25% in the quarter, led by the agriculture and credit (re)insurance division. These results underscore the strength and discipline of our “Rule Our Niche” strategy and the benefits of our intentionally diversified portfolio, much of which is less exposed to P&C market cycles.
Interestingly, the stock is up 11.1% since reporting and currently trades at $51.73.
Best Q3: Root (NASDAQ: ROOT)
Pioneering a data-driven approach that rewards good driving habits, Root (NASDAQ: ROOT) is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.
Root reported revenues of $387.8 million, up 26.9% year on year, outperforming analysts’ expectations by 4.5%. The business had an incredible quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ net premiums earned estimates.
Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 17.2% since reporting. It currently trades at $74.10.
Is now the time to buy Root? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q3: Progressive (NYSE: PGR)
Starting as a small auto insurance company in 1937 with a pioneering focus on high-risk drivers, Progressive (NYSE: PGR) is a major auto, property, and commercial insurance provider that offers policies through independent agents, online platforms, and over the phone.
Progressive reported revenues of $22.51 billion, up 14.2% year on year, in line with analysts’ expectations. It was a softer quarter as it posted a significant miss of analysts’ EPS estimates and a miss of analysts’ book value per share estimates.
As expected, the stock is down 5.4% since the results and currently trades at $227.52.
Read our full analysis of Progressive’s results here.
Kinsale Capital Group (NYSE: KNSL)
Founded in 2009 during the aftermath of the financial crisis when many insurers were retreating from riskier markets, Kinsale Capital Group (NYSE: KNSL) is an insurance company that specializes in writing policies for hard-to-place, unusual, or high-risk businesses that standard insurers typically avoid.
Kinsale Capital Group reported revenues of $497.5 million, up 19% year on year. This result beat analysts’ expectations by 10.9%. Overall, it was a strong quarter as it also produced an impressive beat of analysts’ net premiums earned estimates and a solid beat of analysts’ revenue estimates.
The stock is down 12.5% since reporting and currently trades at $396.89.
Read our full, actionable report on Kinsale Capital Group here, it’s free for active Edge members.
Cincinnati Financial (NASDAQ: CINF)
Founded in 1950 by independent insurance agents seeking stable market options for their clients, Cincinnati Financial (NASDAQ: CINF) provides property casualty insurance, life insurance, and related financial services through independent agencies across 46 states.
Cincinnati Financial reported revenues of $2.87 billion, up 12.1% year on year. This print was in line with analysts’ expectations. It was an exceptional quarter as it also put up an impressive beat of analysts’ book value per share estimates and a beat of analysts’ EPS estimates.
The stock is up 5.3% since reporting and currently trades at $165.93.
Read our full, actionable report on Cincinnati Financial here, it’s free for active Edge members.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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