The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how property & casualty insurance stocks fared in Q3, starting with Bowhead Specialty (NYSE: BOW).
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 15.1%.
In light of this news, share prices of the companies have held steady. On average, they are relatively unchanged since the latest earnings results.
Bowhead Specialty (NYSE: BOW)
Named after the Arctic bowhead whale known for navigating challenging waters, Bowhead Specialty Holdings (NYSE: BOW) is a specialty insurance company that provides customized coverage for complex and high-risk commercial sectors.
Bowhead Specialty reported revenues of $143.9 million, up 23.3% year on year. This print exceeded analysts’ expectations by 1.2%. Overall, it was a strong quarter for the company with a beat of analysts’ EPS estimates and a narrow beat of analysts’ revenue estimates.
Bowhead Chief Executive Officer, Stephen Sills, commented, “Bowhead delivered another excellent quarter highlighted by consistent strong top and bottom line growth. Gross written premiums in the third quarter grew 17.5% year-over-year and adjusted net income grew 25.5%. We achieved adjusted return on equity of 15.1% and diluted adjusted earnings per share of $0.47. These results are a testament to our disciplined approach to underwriting, the continued expansion of our “craft” and “flow” underwriting operations, and our commitment to operational excellence.
Interestingly, the stock is up 5.9% since reporting and currently trades at $25.79.
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 10.1% since reporting. It currently trades at $80.45.
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: Selective Insurance Group (NASDAQ: SIGI)
Founded in 1926 during the early days of automobile insurance, Selective Insurance Group (NASDAQ: SIGI) is a property and casualty insurance company that sells commercial, personal, and excess and surplus lines insurance products through independent agents.
Selective Insurance Group reported revenues of $1.36 billion, up 9.3% year on year, exceeding analysts’ expectations. Still, it was a softer quarter as it posted a significant miss of analysts’ EPS estimates and a significant miss of analysts’ book value per share estimates.
As expected, the stock is down 5.5% since the results and currently trades at $76.71.
Read our full analysis of Selective Insurance Group’s results here.
Fidelity National Financial (NYSE: FNF)
Issuing more title insurance policies than any other company in the United States, Fidelity National Financial (NYSE: FNF) provides title insurance and escrow services for real estate transactions while also offering annuities and life insurance through its F&G subsidiary.
Fidelity National Financial reported revenues of $4.03 billion, up 11.9% year on year. This print topped analysts’ expectations by 13%. Overall, it was an exceptional quarter as it also put up an impressive beat of analysts’ revenue estimates and a beat of analysts’ EPS estimates.
The stock is up 4.1% since reporting and currently trades at $56.79.
Lemonade (NYSE: LMND)
Built on the principle of giving back unused premiums to charitable causes selected by policyholders, Lemonade (NYSE: LMND) is a technology-driven insurance company that offers homeowners, renters, pet, car, and life insurance through an AI-powered digital platform.
Lemonade reported revenues of $194.5 million, up 42.4% year on year. This number beat analysts’ expectations by 4.8%. It was a stunning quarter as it also recorded a beat of analysts’ EPS estimates and an impressive beat of analysts’ revenue estimates.
The stock is up 30.9% since reporting and currently trades at $77.49.
Read our full, actionable report on Lemonade here, it’s free for active Edge members.
Market Update
As a result of the Fed’s rate hikes in 2022 and 2023, inflation has come down from frothy levels post-pandemic. The general rise in the price of goods and services is trending towards the Fed’s 2% goal as of late, which is good news. The higher rates that fought inflation also didn't slow economic activity enough to catalyze a recession. So far, soft landing. This, combined with recent rate cuts (half a percent in September 2024 and a quarter percent in November 2024) have led to strong stock market performance in 2024. The icing on the cake for 2024 returns was Donald Trump’s victory in the U.S. Presidential Election in early November, sending major indices to all-time highs in the week following the election. Still, debates around the health of the economy and the impact of potential tariffs and corporate tax cuts remain, leaving much uncertainty around 2025.
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