The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Selective Insurance Group (NASDAQ: SIGI) and the rest of the property & casualty insurance stocks fared in Q2.
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 satisfactory Q2. As a group, revenues beat analysts’ consensus estimates by 1.5%.
Thankfully, share prices of the companies have been resilient as they are up 6.1% on average since the latest earnings results.
Weakest Q2: 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 $127.9 million, down 89.3% year on year. This print fell short of analysts’ expectations by 90.3%. Overall, it was a disappointing quarter for the company with a significant miss of analysts’ EPS and book value per share estimates.
“The combined ratio of 100.2% reflects continued pressures from elevated severities due to social inflation, which drove unfavorable prior year casualty reserve development in the quarter,” said John J. Marchioni, Chairman, President and Chief Executive Officer.
Selective Insurance Group delivered the weakest performance against analyst estimates and slowest revenue growth of the whole group. Unsurprisingly, the stock is down 10.4% since reporting and currently trades at $81.04.
Read our full report on Selective Insurance Group here, it’s free.
Best Q2: 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 $382.9 million, up 32.4% year on year, outperforming analysts’ expectations by 7.5%. 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 23.7% since reporting. It currently trades at $93.90.
Is now the time to buy Root? Access our full analysis of the earnings results here, it’s free.
Erie Indemnity (NASDAQ: ERIE)
Operating under a unique business model dating back to 1925, Erie Indemnity (NASDAQ: ERIE) serves as the attorney-in-fact for Erie Insurance Exchange, managing policy issuance, claims handling, and investment services for this reciprocal insurer.
Erie Indemnity reported revenues of $1.06 billion, up 7% year on year, falling short of analysts’ expectations by 2.6%. It was a disappointing quarter as it posted a significant miss of analysts’ EPS estimates.
As expected, the stock is down 5% since the results and currently trades at $335.05.
Read our full analysis of Erie Indemnity’s results here.
Employers Holdings (NYSE: EIG)
With roots in Nevada and a strong concentration in California where 45% of its premiums are generated, Employers Holdings (NYSE: EIG) is a specialty provider of workers' compensation insurance focused on small and select businesses engaged in low-to-medium hazard industries across the United States.
Employers Holdings reported revenues of $246.3 million, up 13.5% year on year. This number surpassed analysts’ expectations by 9.1%. Zooming out, it was a slower quarter as it recorded a significant miss of analysts’ EPS estimates and a significant miss of analysts’ book value per share estimates.
The stock is down 4.9% since reporting and currently trades at $43.35.
Read our full, actionable report on Employers Holdings here, it’s free.
Mercury General (NYSE: MCY)
Founded in 1961 and maintaining a network of over 6,300 independent agents across the country, Mercury General (NYSE: MCY) is an insurance company that primarily sells automobile insurance policies through independent agents in 11 states, with a strong focus on California.
Mercury General reported revenues of $1.48 billion, up 13.2% year on year. This print topped analysts’ expectations by 2%. Overall, it was a stunning quarter as it also produced a beat of analysts’ EPS estimates and an impressive beat of analysts’ net premiums earned estimates.
The stock is up 12.6% since reporting and currently trades at $79.11.
Read our full, actionable report on Mercury General here, it’s free.
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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