3 Things – Reading Results, Notable Deals Moving Forward & Property Movements

Hello, Friends!  We’re back with the latest edition of ‘3 Things We Learned,’ where we dive into weekly headlines to uncover the major themes shaping our industry.  This week earnings season continues and major international players reported along with newly public and insurtechs.  There are mostly positive results signaling a turnaround from the prior two years.  Truist Insurance Holding’s divestiture from the banking parent came to fruition while the Aon / NFP merger cleared a major hurdle.  There were other new launches and investments to follow focused in the property segment where we continue to see opportunities in the new market dynamics.  So, let’s dive in and explore together once again.

Reading Results from Major Multinational Players

Berkshire Hathaway released earnings and their (re)insurance businesses generated $5.4bn of underwriting gain.  This included a turnaround for GEICO, achieving a $3.6bn underwriting profit, reversing a $1.9bn loss from the previous year.  Warren’s favorite metric, insurance float, grew to approximately $169bn up from $164bn in 2022.

Allianz achieved record operating profit powered by strong performance across all segments despite catastrophe losses and continued plans to cut expenses in their P/C business.  They also shared a broader strategy to diversify their reinsurance to protect against future concerns over geopolitical tensions, natural catastrophe costs, inflation, political polarization, and AI.

Zurich reported record profits while increasing their dividend.  They are experiencing strong growth across all businesses and expect the positive momentum to continue.  The Farmers unit improved their combined ratio to 89.8, a substantial improvement from the past year.  AXA XL continues to see strong growth and the results of their management actions to reduce catastrophic exposure.  They announced a new strategic plan ‘Unlock the Future’ that details key financial targets and capital management policy.

SiriusPoint has showcased a remarkable turnaround in its core operations, achieving an 89.1% combined ratio with a net income leap of $742 million from the previous fiscal year.  This financial rebound is attributed to strategic simplifications, notably the reduction of equity investments in managing general agents (MGAs) from 36 to 25.  Enstar Group closed the year with a bang, posting a net income of $1.1 billion for its shareholders and an impressive 24.2% return on equity.  They also highlighted their strategic prowess in mergers and acquisitions, acquiring $2.2 billion of liabilities through key transactions.

Skyward Specialty Insurance Group ended the year on a high note, with a fourth-quarter report that speaks volumes of its growth and operational excellence. The company saw a 21.4% increase in gross written premiums and improved its underwriting income to $21.0 million, up from $12.8 million in the same quarter the previous year. All with a healthy combined ratio of 90.7%.

Meanwhile, the first insurtechs begin reporting with more to come over the next couple of weeks.  Kin continues to grow and has reached $343.5 million in force premium.  They plan to continue to expand their geographical footprint and tout a healthy adjusted loss ratio below their target.  Root has reduced their net loss for Q4 2023 to $24m improving from the year earlier.  CEO Alex Timm says they could be profitable if they reduced their marketing investments but that was not the best approach to drive shareholder value.  He is committed to arriving at positive profitability in 2025 but their combined ratio continues to run high.

Notable Deals Moving Forward

Two significant transactions we have been following have unfolded.  As these companies embark on their new journeys, the industry at large anticipates the ripple effects of these transactions, eagerly watching how these strategic moves will shape the future landscape of insurance services, product offerings, and market competition.

Truist Financial Corporation has announced a move with the sale of its remaining stake in Truist Insurance Holdings (TIH) to an investor group led by Stone Point Capital and Clayton, Dubilier & Rice. This transaction, valuing TIH at a staggering $15.5 billion, is not just a testament to TIH’s intrinsic value but also underscores the immense potential and attractiveness of the insurance brokerage market to investors. With the sale expected to bolster Truist’s capital ratio and tangible book value per share significantly, it paves the way for the company to further invest in its core banking franchise and explore various capital deployment strategies.

Parallelly, another transformative deal with Aon and NFP’s announcement regarding the expiration of the Hart-Scott-Rodino Antitrust Act waiting period for their proposed acquisition agreement. This development marks a critical milestone towards finalizing the acquisition, with the deal expected to close in mid-2024. The continuation of independent operations by Aon and NFP until the closure of the transaction speaks to the meticulous planning and regulatory compliance involved in such large-scale acquisitions. The anticipated integration of NFP into Aon’s global operations hints at a strategic alignment aimed at leveraging synergies to deliver enhanced value to clients and stakeholders.

Property Insurance Movements & Launches

In the dynamic landscape of the property insurance market, several companies are making moves to address evolving risks, cater to niche markets, and integrate insurance with home maintenance.  As the property insurance space continues to evolve, such opportunistic launches will likely become more prevalent, driving competition, fostering innovation, and ultimately benefiting consumers with more tailored and comprehensive insurance solutions.

The launch of Neptune Flood’s excess flood insurance product is a strategic move to meet the growing demand for coverage limits exceeding those offered by the National Flood Insurance Program (NFIP). With property values escalating and NFIP limits remaining static, Neptune has identified and seized an opportunity to fill a significant gap in the market. This positions Neptune as a forward-thinking player in the insurance space, ready to adapt its offerings to the changing economic landscape.

PURE Programs’ introduction of a new insurance solution for high-value homes under construction or renovation underscores the industry’s shift towards more tailored and specialized products. By focusing on a niche segment that requires bespoke coverage options, PURE Programs is tapping into a market with specific needs that are not adequately met by traditional insurance policies. This approach demonstrates an understanding of the unique risks associated with high-value properties satisfying a need with significant growth in building in cat-prone areas.

The launch of Fixle, Inc., initially incubated by American Family Insurance, as an independent company, marks a significant departure from traditional insurance offerings. By focusing on simplifying home maintenance and management, Fixle addresses a critical pain point for homeowners, offering a platform that integrates various stakeholders in the property ecosystem. This venture reflects American Family Insurance’s commitment to innovation beyond conventional insurance products.

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!