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September 2019

P&C Insurance Underwriters – Q2 2019


By almost all metrics, 2019Q2 was a solid quarter for P&C underwriters. Of the 52 P&C underwriters tracked by 7 Mile Advisors, 52% (27 companies) surpassed earnings expectations, 19% (10 companies) were in line, while just 21% (11 companies) missed expectations (8%, or 4 companies are not tracked by analysts). Importantly, of the companies who beat analysts’ estimates, the average earnings surprise was 13.7%, suggesting that P&C underwriters dramatically outperformed expectations.

Besides the empirical data, the market commentary was equally sanguine. Below we note some common themes that we gleaned from earnings transcripts.

  • Rates are broadly increasing – The rate environment is generally positive, with most companies noting 5%+ rate improvements across the board with the exception of workers’ comp and auto. Specifically, Chubb noted that the rate environment is the best they have seen in 5 years.
  • Underwriting discipline reigns – Underwriting results were robust, with ~75% of our tracked companies reporting underwriting profit (combined ratio below 100%), with the average combined ratio of 96.3% in the quarter. A number of companies such as RLI and The Hanover Group are making specific moves to reduce exposure in areas where pricing was not sufficient to offset the risk.
  • Prior years developing favorably – Of the companies featured in this report, almost all reported favorable prior year development in their loss reserves.

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