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TRV or ALL: Which P&C Insurance Industry Stock Has an Edge?
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With another hurricane season already underway, property and casualty insurers are bracing up to weather its impact. The rise in interest rate is indicative of a healthy economy, which along with prudent underwriting, instills confidence for the days ahead.
P&C insurers’ profitability is inversely related to catastrophic events. Colorado State University (CSU) expects an active Atlantic hurricane season this year with 19 named storms. These include nine hurricanes and four major hurricanes. This year’s hurricane season could be about 130% of average season per CSU.
Improving pricing will help limit the downside. Per Willis Towers Watson’s 2022 Insurance Marketplace Realities report, rates will continue to rise but by a small margin. Better pricing will help insurers write higher premiums and address claims payment prudently. Per Deloitte insights, global non-life premiums are estimated to grow 3.7% in 2022. Exposure growth, prudent underwriting, favorable reserve development and sturdy capital level are other tailwinds that should support P&C insurers.
The interest rate environment has started to improve. With two rates hikes already this year and more in the cards, insurers, being the direct beneficiary of an improving rate environment, are poised to benefit.
Accelerated digitalization with the use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation expedite business operations and save cost.
Solid policyholders’ surplus will help the industry absorb losses. Also, given the solid capital level, insurers are actively pursuing strategic mergers and acquisitions and investing in growth initiatives apart from engaging in share buybacks, increasing dividends or paying out special dividends.
The industry has gained 5.2% year to date against the Finance sector’s decrease of 9.6% and the Zacks S&P 500 composite’s decline of 15.9%.
Image Source: Zacks Investment Research
Here we focus on two property and casualty insurers, namely The Allstate Corporation (ALL - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) . Allstate is the third-largest property-casualty (P&C) insurer and the largest publicly-held personal lines carrier in the United States. Travelers is one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance. Both the companies carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s now see how these P&C insurers have fared in terms of some of the key metrics.
Price Performance
Travelers has rallied 13.7% year to date compared with the industry’s increase of 5.2% and Allstate’s decline of 1.5%.
Return on Equity (ROE)
Travelers has a return on equity of 13.8%, which exceeds Allstate’s ROE of 12.5% and the industry average of 5.7%.
Valuation
Price-to-book value is the best multiple used for valuing insurers. Compared with Allstate’s reading of 1.7, Travelers is cheaper with a reading of 1.65. The P&C insurance industry’s P/B ratio is 1.3.
Dividend Yield
Allstate’s dividend yield of 2.3% tops Travelers’ 2% as well as the industry’s average of 0.4%.
Leverage
Travelers’s debt-to-equity ratio of 28.6 is lower than the industry average of 23.6 as well as Allstate’s reading of 34.5.
Earnings Surprise History
Travelers outpaced expectations in each of the four trailing quarters, delivering an earnings surprise of 31.40%, on average. Allstate surpassed estimates in two of the last four reported quarters, with the average surprise being negative 8.84%.
Growth Projection
The Zacks Consensus Estimate for 2022 earnings indicates a 3.2% decline from the year-ago reported figure for Travelers and 32.2% for Allstate.
The long-term expected earnings growth is pegged at 3.5% for Travelers and 5.4% for Allstate.
Travelers’ Growth Score of B is better than a Growth Score of D for Allstate. Growth Score analyzes the growth prospects of a company.
VGM Score
VGM Score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth and most promising momentum. Travelers has an impressive VGM Score of A while Allstate has a VGM Score of B. Travelers thus has an edge in this respect.
To Conclude
Our comparative analysis shows that Travelers has an edge over Allstate with respect to almost all the parameters.
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TRV or ALL: Which P&C Insurance Industry Stock Has an Edge?
With another hurricane season already underway, property and casualty insurers are bracing up to weather its impact. The rise in interest rate is indicative of a healthy economy, which along with prudent underwriting, instills confidence for the days ahead.
P&C insurers’ profitability is inversely related to catastrophic events. Colorado State University (CSU) expects an active Atlantic hurricane season this year with 19 named storms. These include nine hurricanes and four major hurricanes. This year’s hurricane season could be about 130% of average season per CSU.
Improving pricing will help limit the downside. Per Willis Towers Watson’s 2022 Insurance Marketplace Realities report, rates will continue to rise but by a small margin. Better pricing will help insurers write higher premiums and address claims payment prudently. Per Deloitte insights, global non-life premiums are estimated to grow 3.7% in 2022. Exposure growth, prudent underwriting, favorable reserve development and sturdy capital level are other tailwinds that should support P&C insurers.
The interest rate environment has started to improve. With two rates hikes already this year and more in the cards, insurers, being the direct beneficiary of an improving rate environment, are poised to benefit.
Accelerated digitalization with the use of technology like blockchain, artificial intelligence, advanced analytics, telematics, cloud computing and robotic process automation expedite business operations and save cost.
Solid policyholders’ surplus will help the industry absorb losses. Also, given the solid capital level, insurers are actively pursuing strategic mergers and acquisitions and investing in growth initiatives apart from engaging in share buybacks, increasing dividends or paying out special dividends.
The industry has gained 5.2% year to date against the Finance sector’s decrease of 9.6% and the Zacks S&P 500 composite’s decline of 15.9%.
Image Source: Zacks Investment Research
Here we focus on two property and casualty insurers, namely The Allstate Corporation (ALL - Free Report) and The Travelers Companies, Inc. (TRV - Free Report) . Allstate is the third-largest property-casualty (P&C) insurer and the largest publicly-held personal lines carrier in the United States. Travelers is one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance. Both the companies carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s now see how these P&C insurers have fared in terms of some of the key metrics.
Price Performance
Travelers has rallied 13.7% year to date compared with the industry’s increase of 5.2% and Allstate’s decline of 1.5%.
Return on Equity (ROE)
Travelers has a return on equity of 13.8%, which exceeds Allstate’s ROE of 12.5% and the industry average of 5.7%.
Valuation
Price-to-book value is the best multiple used for valuing insurers. Compared with Allstate’s reading of 1.7, Travelers is cheaper with a reading of 1.65. The P&C insurance industry’s P/B ratio is 1.3.
Dividend Yield
Allstate’s dividend yield of 2.3% tops Travelers’ 2% as well as the industry’s average of 0.4%.
Leverage
Travelers’s debt-to-equity ratio of 28.6 is lower than the industry average of 23.6 as well as Allstate’s reading of 34.5.
Earnings Surprise History
Travelers outpaced expectations in each of the four trailing quarters, delivering an earnings surprise of 31.40%, on average. Allstate surpassed estimates in two of the last four reported quarters, with the average surprise being negative 8.84%.
Growth Projection
The Zacks Consensus Estimate for 2022 earnings indicates a 3.2% decline from the year-ago reported figure for Travelers and 32.2% for Allstate.
The long-term expected earnings growth is pegged at 3.5% for Travelers and 5.4% for Allstate.
Travelers’ Growth Score of B is better than a Growth Score of D for Allstate. Growth Score analyzes the growth prospects of a company.
VGM Score
VGM Score rates each stock on their combined weighted styles, helping to identify those with the most attractive value, best growth and most promising momentum. Travelers has an impressive VGM Score of A while Allstate has a VGM Score of B. Travelers thus has an edge in this respect.
To Conclude
Our comparative analysis shows that Travelers has an edge over Allstate with respect to almost all the parameters.