This is the fourth article in a series that highlights current trends in the leading segments in the Financial Services sector as revealed during the RBC Capital Markets’ Financial Institutions Conference. The three previous articles covered trends in Asset Management, Banking and Business Development Lending.
Analyst Mark A. Dwelle moderated the P&C Insurance Market Overview Panel and provided useful insights from his discussions with senior management and panelists on Day 1 of the conference.
David Einhorn's Greenlight Capital returned -2.9% in the second quarter of 2021 compared to 8.5% for the S&P 500. According to a copy of the fund's letter, which ValueWalk has reviewed, longs contributed 5.2% in the quarter while short positions detracted 4.6%. Q2 2021 hedge fund letters, conferences and more Macro positions detracted 3.3% from Read More
Selective Insurance Group (NASDAQ:SIGI)
Argo Group International Holdings, Ltd. (NASDAQ:AGII)
Alliant Insurance Services, Inc.
Insurance Market pricing and profitability
Pricing power is still favorable in commercial insurance, and is relatively easier to obtain on the small-premium accounts. A rising trend is witnessed in pricing, with Selective Insurance Group (NASDAQ:SIGI) reporting average increase of 7.8% during the first two months of Q3. Argo Group International Holdings, Ltd. (NASDAQ:AGII) said average rates were up 5% in its core E&S book. Alliant reported that rates were higher by the low-to-mid single digits.
Investment income is likely to be boosted during the current rising interest regime. Yet interest rates remain very low and investment income therefore needs to be supported by insurance pricing increases so as to maintain aggregate profitability.
Insurance market growth and competition
There was consensus that the business climate was healthy and that growth prospects were good over the next few years. Argo Group International Holdings, Ltd. (NASDAQ:AGII) saw potential growth in niche sectors such as specialty healthcare, Lloyds Banking Group PLC (ADR) (NYSE:LYG) (LON:LLOY), public entity and aviation/aerospace. Alliant expects business to grow in its construction market, while Selective Insurance Group (NASDAQ:SIGI) will expand through higher market share, increased market penetration and contract binding. However, competition is tough in workmen’s compensation, property and surety lines, as well as certain international products.
Insurance market capital adequacy
All participants said they were well-capitalized, and in fact Argo Group International Holdings, Ltd. (NASDAQ:AGII) said it had capital to spare for buybacks, acquisitions and for pushing expansion.