3 Things – Positive Earnings Momentum, MGA Growth & AI Investment

Hi Friends! We made it through the two-week whirlwind of ITC and Target Markets back-to-back, they were both great conferences with lots of activity. This week, it was great to be a part of the community where ‘Program Business Gets Done’. It was evident that specialty programs and carriers were busy matching-making capacity with opportunities to target niche risk. The segment’s growth was on display, with everyone running around to meetings. Meanwhile, the world outside continued to have a stream of news, highlighted mainly by Q3 2024 earnings, which featured reports from carriers and brokers. In addition, we are following examples of MGA growth and the next wave of innovations and funding events that provide insights into where investors see opportunity. Let’s dive into the three things we learned this week.

Continuing Positive Momentum in Earnings

Insurance entities throughout the value chain continued to report their Q3 results, with the common theme being that despite the catastrophic weather conditions, they remain mostly profitable and able to absorb the losses. From larger carriers with a commercial focus to broker and retail entities, it was clear that rates adequacy seems to be intact and there is adequate reserves to handle the losses.

W.R. Berkley CEO Rob Berkley highlighted regulatory and staffing challenges in the commercial lines market during the Q3 2024 earnings call, noting a shift towards the specialty E&S markets. Catastrophe losses climbed to $97.8 million, largely due to Hurricane Helene. Despite these challenges, average rates grew by 8.4%, driving optimism for future underwriting and investment income growth. Berkley expects annual growth of 10% to 15%, contingent on underwriting margins.

CNA Financial’s CEO, Dino E. Robusto, emphasized that despite the significant catastrophe losses—including $143 million for Q3 2024—the financial impact aligns with the company’s quarterly historical averages. Robusto pointed out that the company’s commercial and international segments could absorb these losses effectively, maintaining expected performance. He also noted that while future losses from Hurricane Milton are anticipated, CNA’s solid underwriting approach and financial resilience position them well to handle these challenges.

Hartford Financial Services Group saw a strong Q3 2024, with net income climbing to $761 million, up from $645 million last year, despite higher catastrophe losses driven by hurricanes Helene and Milton. CEO Christopher Swift highlighted a 9% growth in commercial lines, with significant gains in small commercial and middle market segments, while auto and homeowners lines showed signs of recovery.

A.J. Gallagher’s Q3 2024 net earnings rose to $314.1 million, a 12% increase, with revenues climbing 13% to $2.77 billion. Despite a $113.5 million corporate segment loss, CEO J. Patrick Gallagher, Jr. highlighted robust economic activity, successful mergers, and increasing renewal premiums. He emphasized a thriving company culture and an optimistic outlook, underlined by a promising M&A pipeline and positive client exposure trends.

Aon’s Q3 2024 revenue increased by 26% to $3.7 billion, with 7% organic growth across its segments. The Reinsurance Solutions division grew 7% organically, driven by strong treaty and facultative placements. Despite revenue gains, expenses rose 33%, impacting operating and net income, which dropped by 10% and 25% respectively. CEO Greg Case emphasized Aon’s consistent performance and alignment with financial targets for the year.

Selective Insurance reported a strong Q3 2024 performance, with net income rising to $90 million from $86.9 million a year earlier, despite higher catastrophe losses. CEO John Marchioni highlighted improved underlying profitability and a 16% increase in post-tax investment income, reaching $93.4 million. Catastrophe losses added 13.4 points to the combined ratio, which hit 99.5—above the 95 target. Significant losses came from Hurricane Helene, costing an estimated $85 million.

Cincinnati Financial returned to profitability in Q3 2024, posting net income of $820 million, a sharp turnaround from a $99 million loss in Q3 2023. This rebound was driven by a $645 million after-tax increase in the fair value of equity securities. Catastrophe losses, including $86 million from Hurricane Helene, increased by 13 points to a combined ratio of 97.4, up from 94.4 last year. CEO Stephen Spray highlighted the company’s expansion into high net worth and excess and surplus markets, signaling a shift in its personal lines strategy.

Donegal Group’s Q3 2024 net income reached $16.8 million, rebounding from last year’s loss, with an 8.1-point improvement in the combined ratio. This success was achieved despite strategic exits from commercial business in Georgia, Alabama, and a phased withdrawal from personal lines in Maryland. Complementing this strategy, Donegal partnered with ZestyAI, utilizing AI-driven Roof Age technology to refine risk assessments for personal lines, optimizing underwriting accuracy and enhancing property risk management.

Goosehead Insurance reported record Q3 2024 premiums, surpassing $1 billion for the first time. Franchise productivity rose 52% year-over-year, and the corporate agent count increased from 276 to 458, highlighting a strong recruiting season. Expansion is set with a new office in Phoenix in early 2025 to support Western US growth. Despite a challenging homeowners market, the company is leveraging its strategy to bring quality clients to carriers, with early signs of improvement in auto insurance.

MGAs Expand with Strategic Partnerships to Drive Specialty Market Growth

As evidenced by what was on display this week at Target Markets, the MGA landscape is strengthening with key partnerships and expanded carrier capacities, driving growth in specialty insurance. MGA platforms are forming alliances with major insurers to enhance their offerings and tap into the growing market.

Rokstone, part of the Aventum Group, secured a three-year agreement with Aviva to underwrite direct and facultative property business globally, with a $2 million per risk limit. This partnership is projected to generate over $200 million in gross written premiums. The deal adds stability to Rokstone’s operations, leveraging delegated authority from top-rated markets, including Allianz and Munich Re, further enhancing its specialty insurance offerings.

Recently launched, Pivix Specialty Insurance has entered a property/casualty binding agreement with Canopius US Insurance, focusing on smaller E&S risks within the commercial property and general liability sectors. This partnership, leveraging Pivix’s expertise and Canopius’s market presence, aims to address the needs of the fast-growing E&S market.

AI Innovations Drive Investment in the Insurance Industry

AI continues to gain momentum, with insurers and capital providers making strategic investments to streamline operations, enhance risk assessments, and improve client services. These stories highlight a growing commitment to integrating AI for smarter, faster, and more accurate insurance processes, continuing to prove the use cases within insurance.

AIG announced it will create 600 jobs in Atlanta as part of a consolidation effort, moving its Alpharetta and Buckhead operations to an innovation hub. This 180,000-square-foot space, expected to open in 2026, will focus on underwriting, claims, data engineering, and AI development. AIG’s CEO, Peter Zaffino, emphasized the company’s commitment to innovation and local talent.

Aurora has secured seed funding from QBE Ventures. As an insurtech company, Aurora focuses on enhancing risk assessment and underwriting processes within the insurance industry. This investment will help advance their development of digital solutions. The company utilizes advanced technologies such as data analytics and artificial intelligence to streamline workflows and improve the accuracy of risk evaluations.

Agentech has secured $3 million in funding to enhance insurance claims processing using an AI-driven workforce. This funding will support Agentech’s development of technology to streamline claims management, focusing on automating routine tasks and improving accuracy in claims assessments. By leveraging artificial intelligence, the company aims to reduce processing time and operational costs for insurers, positioning itself as a leader in modernizing claims handling.

Herald raised $12 million in a Series A funding round to enhance its AI-powered API platform that connects insurance brokers with carriers. The funding will help accelerate Herald’s mission to streamline commercial insurance workflows. By automating data entry and improving connectivity, Herald enhances efficiency and accuracy for both brokers and carriers, driving digital transformation in the insurance space.

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!