3 Things – Property / Niche Risk, Pubic Market Variations & Earnings Focus on Profitability

Hi Friends!  Here is the latest edition of ‘3 Things We Learned’ our weekly post where we use the headlines from the past week in the insurance industry to tell the story of what’s happening tying together the big picture themes and trends.  Once again, earnings took center stage with many firms reporting their 3rd quarter and full year results.  In addition, there were other interesting stories about investments that focus on market opportunities, following the current themes of how insurtech is shaping the future. Just like that, Fortegra pulled back their IPO, and Fairfax got shorted by an activist investor, showing some troubled waters for insurers in the public domain and foreshadowing how the markets will treat insurance entities this year.  Let’s dive right in as we bring you the three things we learned this week.

Property and Niche Risk Insurtech Moves

The entire landscape of property insurance and niche risk coverage continues to evolve, promising a more efficient, responsive, and customer-focused future.  These stories collectively illustrate a larger narrative of change and progress in the specific niches.  Technology is not just an operational tool; it is at the core of strategic business models, driving efficiency, expanding market reach, and offering solutions to previously unaddressed risks.

The partnership between CoverForce and Great American Insurance Group marks a milestone in the GAIC’s digital journey. This collaboration has, for the first time, enabled the digital availability of Great American’s commercial insurance products nationwide. CoverForce’s cutting-edge system simplifies insurance transactions, enhancing efficiency and dramatically reducing the underwriting process from weeks to minutes.

Boost Insurance, another key player in the insurtech arena, has significantly expanded its capabilities by securing over $130 million in new reinsurance capacity. This expansion not only demonstrates confidence from the reinsurance sector but also positions Boost to innovate further in specialty insurance products, addressing emerging risks in areas like cyber security and pet health.

Kin Insurance’s recent financing round, where it secured $15 million from Activate Capital, marks a significant vote of confidence in its approach to the property market.  They now have a valuation exceeding $1 billion, not common in this day and age of insurtech investment.

Shepherd Insurance’s recent Series A funding of $13.5 million is set to revolutionize the commercial construction insurance sector. The company plans to use this investment to enhance its underwriting and software capabilities, addressing the urgent need for innovation in an industry that has been historically slow to embrace technological advancements.

public market variations

Public Market Variations

In the ever-changing world of public markets, insurance companies are navigating through various challenges and opportunities. The recent developments with Fortegra, Fairfax Financial, and Brookfield Reinsurance provide a window into how different companies are approaching their public market status and dealing with the complexities it brings.

Fortegra Group’s decision to withdraw its IPO plans for the second time reflects a cautious approach in an uncertain economic environment. Despite previous attempts and a potential valuation of up to $1.52 billion, the company chose to retreat due to market pessimism and the underwhelming performance of newly public companies.

Fairfax Financial is currently facing allegations from short seller Muddy Waters, accusing the company of asset value manipulation. This accusation led to a significant 12% drop in Fairfax’s shares, marking their worst decline since September 2008. Despite Fairfax’s denial of these claims and their assertion of compliance with accounting principles, the scenario underscores the vulnerability of public companies to market perceptions and the potential impact of short-selling strategies on their public market standing.

In contrast to Fortegra and Fairfax, Brookfield Reinsurance has reported a substantial increase in its net income and distributable operating earnings for 2023, buoyed by factors such as higher spread earnings, increased net investment income, and significant contributions from the recently closed Argo Group transaction. CEO Sachin Shah’s focus on scaling the business and leveraging competitive advantages for strong risk-adjusted returns reflects a proactive and growth-oriented approach in the public market.

Earnings: Profitability and Market Dynamics in Focus

From rate adjustments and portfolio diversification to strategic underwriting and capital management, the companies who reported this week demonstrate resilience and agility in navigating the complex landscape of insurance. Their experiences underscore the importance of strategic planning, adaptation, and innovation in maintaining industry health and profitability.

Allstate tried to focus on their Q4 results with a net income of $1.5 billion in the fourth quarter, which was driven by improved auto profitability and mild weather conditions.  Their strategic focus includes property-liability underwriting income and a combined ratio of 89.5. The reopening of new auto business in California and a focus on insurance bundling are pivotal in their growth strategy.  They appear to have turned the tide from their recent string of losses.

Everest’s strong performance at the January 2024 renewals, with over 25% growth in the property catastrophe portfolio, underscores its solid market position. Their disciplined underwriting approach and portfolio quality, yielding excellent results in specialty lines, demonstrate a focus on sustainable growth amidst favorable market conditions.

Cincinnati Financial reports a significant increase in fourth-quarter net income and a consolidated property/casualty underwriting profit that more than doubled. Their focus on pricing precision and net written premiums growth, coupled with a strong performance from subsidiaries, highlights a strategic approach to profitability in a challenging market.

WTW’s earnings report shows a 7% increase in revenue, with organic growth and an improved operating margin. This performance, marked by a rise in diluted earnings per share, reflects their effective business model in a competitive environment.

Howden hits $3 billion in revenue, with a 33% increase in revenue, driven by organic growth and strategic acquisitions. Their employee ownership model and sustainable capital management strategy have played a crucial role in this success.

CNA’s focus on rate increases in casualty lines and the management liability segment, alongside a strong performance in commercial and specialty segments, contributed to their increased net income and improved combined ratio. Their strategic approach to reinsurance renewals and underwriting gains underscores a balanced response to market dynamics.

SCOR experienced significant growth in its P&C portfolio at the January reinsurance renewals aligns with its strategic plan, emphasizing preferred lines and a balanced portfolio. Their disciplined approach to treaty P&C lines and growth in global lines, alongside improved technical profitability, highlights their adept management in a hard market.

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!