Hi Friends! We are back again with our weekly post using the headlines from the industry to tell the story of the insurance industry tying this week’s news to bigger picture themes. This week, earnings were center stage with many reports coming from major players headlined by Chubb, others strategic moves continue to move forward while investment trends continue to show that there are opportunities for innovation but we have definitely slowed down from the frenzy a couple of years ago. The insurance industry is always methodical and looking to the future with a long view, a true testament to our strength and longevity. As always insurance continues with much of the same common themes but changing parts and interesting stories, let’s dive in with the three things we learned this week.
Chubb Headlines Big Earnings Week
Chubb dropped their Q4 and annual results this week and Evan Greenberg had interesting comments that featured many insights on what we have seen as trends in the industry. It was a ‘blowout’ year with record net income and core operating income of $3.30 billion and $3.41 billion, respectively, up 151.7% and 103.6%. Among many interesting comments, Mr. Greenberg spoke about the trend of personal lines moving to E&S underwriting companies. He believes the admitted market is better but it will take time to solve the climate change dynamics and the regulatory environment to adapt.
RenaissanceRe showcased a financial turnaround in the fourth quarter of 2023, with net income soaring to $1.58 billion, a substantial leap from the previous year’s $448.1 million. The acquisition of Validus Re greatly contributed to this success, as emphasized by CEO Kevin O’Donnell.
Aon experienced a 24% dip in fourth-quarter net income, primarily due to higher expenses, including charges related to legal settlements with Vesttoo Ltd. However, the company saw revenue growth and a promising 7% organic revenue growth. CEO Greg Case highlighted strategic initiatives like the proposed acquisition of NFP Corp., which aims to strengthen Aon’s U.S. market presence.
The Hartford reported a 30% increase in net income for the fourth quarter, reaching $766 million. This was driven by gains in property/casualty underwriting and strong premium growth in commercial lines. Despite some offsetting factors like net realized losses, the company achieved a 25% increase in core earnings.
Hanover Insurance Group focused on strategic repositioning, particularly reducing personal lines business in the Midwest. CEO John Roche emphasized the company’s comfort with these changes, viewing them as improvements in business mix and catastrophe resilience.
AXIS Capital concentrated on specialty underwriting, with a 17% increase in insurance premiums in certain lines. However, the company faced challenges like reserve strengthening and a cautious approach in long-tail lines like public D&O insurance. Despite growth opportunities in various sectors, AXIS Capital posted a $150.2 million net loss in the fourth quarter.
Markel Group experienced a decline in underwriting profit, primarily due to adverse development on prior year loss reserves. Despite a 4% rise in gross premiums volume, the combined ratio deteriorated. CEO Thomas S. Gayner highlighted the need for improvement in some insurance operations.
Lastly, Selective Insurance Group reported significant growth in net premiums written, with strong performance in standard commercial and personal lines, and excess and surplus lines. CEO John J. Marchioni emphasized the company’s disciplined underwriting and strategic advancements, leading to a decade of double-digit operating ROE and surpassing $4 billion in NPW for the first time.
Acquisitions, IPOS and Restructuring Strategies Continue
The recent strategic moves continue to feature targeted acquisitions, public market expansions, and structural transformations. Hadron Specialty’s acquisition of Folgate Insurance Company marks a bold step into the UK market, exemplifying a clear strategy to enhance the success of its specialty MGU partners globally. This move, as highlighted by Sam Gaynor of Altamont Capital, is in line with Hadron’s global approach, blending advanced underwriting and portfolio management technology.
Core Specialty announced an investment in Gramercy Risk Holdings, a strategic move to provide capital for growth and become the exclusive policy-issuing carrier for Gramercy products. Both companies combine a successful track records and senior management talent that will leverage their combined capabilities for growth in specialty risks.
Fortegra’s launch of its initial public offering is the latest in a string of IPOs seen in the industry. As a global specialty insurer, this move to go public, signifies a transition into a new phase of growth and visibility.
West Bend Mutual Insurance’s conversion into a stock company, now a subsidiary of the new West Bend Mutual Holding Company, illustrates a different but equally strategic approach. This transformation, as explained by CEO Kevin Steiner, is the result of long-term strategy discussions and is aimed at enhancing the company’s ability to expand through subsidiaries and acquisitions. The new structure may signal a strategy establishing them as an acquirer of struggling mutuals.
Insurtech Investment Down YoY But Continues to Focus
The Gallagher Global InsurTech Report for Q4 2023 revealed there was a slight quarter-on-quarter increase in funding, yet a significant year-on-year decline, suggesting the cautious yet steady investment approach in the Insurtech space continues. Interestingly, the U.S. saw the largest growth in deal share, reflecting its burgeoning role as a hub for InsurTech innovation. This week, like most, saw several examples of this trend in action.
Coalition’s launch of Miscellaneous Professional Liability (MPL) Insurance marks a strategic move to cater to the burgeoning professional services industry. This product, designed to protect businesses against professional service errors and omissions, is a response to the sector’s anticipated growth. By integrating MPL Insurance with their existing Active Cyber Insurance policies, Coalition simplifies the insurance process for businesses.
Elsewhere the cyber world, BOXX Insurance, in collaboration with AXA, introduced an advanced cyber risk mitigation solution targeting small businesses. This launch reflects a keen awareness of the unique vulnerabilities small enterprises face in the digital domain.
Indemn’s securing of $1.9 million in funding to develop the first AI-powered conversational insurance platform represents a leap forward in how insurance products are understood and purchased. Their use of Large Language Models for customer engagement is set to revolutionize the customer experience in insurance acquisition.
Join us as we continue to explore the headlines and news shaping the insurance sector, and stay tuned for more insights on the unfolding narrative of our industry! Stay productive, stay safe and stay in touch!