3 Things – Q1 Cat Losses, Earnings & Embedded Ups/Downs

Hello Friends!  Another week has brought us into earnings season and deeper into spring.  We are following catastrophe losses in Q1, earnings reports and embedded insurance ups and downs.  Here are the three things we learned:


Cat Losses Continue in Q1

March wind and storms in non-traditional locales were among other cat events that will make Q1 losses harsh for many insurers.  Not good news after the difficult year we had in 2022.  Gallagher Re issued their Q1 catastrophe report and are estimating losses to be $22 billion, the highest first quarter loss since 2011.  Aon’s estimate is $15 billion but the total economic losses could be $63 billion or worse.  W.R. Berkley had a significant increase in cat losses leading to an increase in their combined ratio and dent in profits.  Last week we started to see carriers warn ahead of earnings announcements about expected losses.  That continued this week with carriers including Cincinnati Financial and Allstate, who gave similar warnings to investors.


Travelers, Marsh & RLI Earnings

Travelers had a strong quarter for new business and grew net written premiums by 15% but overall net income declined 4% due to $535 million of cat losses.  The cat losses they experienced were more than triple a year earlier and are way above the five-year average of $160 million.  On the broker front, Marsh Q1 showed revenue growth of 8.3% powering net income growth.  As has been the trend brokers are benefiting from increasing rates.  Marsh saw property rates increasing by 10% and cyber is still leading the way in terms of LOB increases but is showing signs of moderating.  RLI posted an enviable combined ratio of 77.9, flat from a year earlier.  Premium growth was 16% driven by property and surety LOBs showing the resilience of a specialty carrier.


Embedded Trends Continued

Embedded insurance is exciting and could be a key part of the future but it will be important to learn what works and what may need tweaking.  Coverager reported that Intuit’s Quickbooks will discontinue their embedded offering after failing to achieve traction.  It shows that a timely offer of insurance does not always lead to high conversion rates.  In the small business space, owners may be skeptical or unware of the importance of insurance.  A newer entrant, INSHUR, an on-demand auto provider, acquired an agency platform American Business Insurance Services. The announcement came along with a capital raise of $26 million.  ABI is an established, California-based agency platform and insures 50,000 vehicles giving them a large volume of data.  This acquisition and capital infusion will provide a boost to INSHUR’s growth strategy for embedded products for fleets and on-demand drivers.  Auto should be a good place for embedded offerings with connected vehicles and data.  Individual owners and fleet managers know that insurance is mandatory and important.

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