The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how property & casualty insurance stocks fared in Q2, starting with Erie Indemnity (NASDAQ: ERIE).
Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.
The 33 property & casualty insurance stocks we track reported a satisfactory Q2. As a group, revenues beat analysts’ consensus estimates by 1.5%.
In light of this news, share prices of the companies have held steady as they are up 4.9% on average since the latest earnings results.
Erie Indemnity (NASDAQ: ERIE)
Operating under a unique business model dating back to 1925, Erie Indemnity (NASDAQ: ERIE) serves as the attorney-in-fact for Erie Insurance Exchange, managing policy issuance, claims handling, and investment services for this reciprocal insurer.
Erie Indemnity reported revenues of $1.06 billion, up 7% year on year. This print fell short of analysts’ expectations by 2.6%. Overall, it was a disappointing quarter for the company with a significant miss of analysts’ EPS estimates.
Unsurprisingly, the stock is down 10% since reporting and currently trades at $317.30.
Is now the time to buy Erie Indemnity? Access our full analysis of the earnings results here, it’s free.
Best Q2: Root (NASDAQ: ROOT)
Pioneering a data-driven approach that rewards good driving habits, Root (NASDAQ: ROOT) is a technology-driven auto insurance company that uses mobile apps to acquire customers and data science to price policies based on individual driving behavior.
Root reported revenues of $382.9 million, up 32.4% year on year, outperforming analysts’ expectations by 7.5%. The business had an incredible quarter with a beat of analysts’ EPS estimates and an impressive beat of analysts’ net premiums earned estimates.
Although it had a fine quarter compared its peers, the market seems unhappy with the results as the stock is down 20.1% since reporting. It currently trades at $98.35.
Is now the time to buy Root? Access our full analysis of the earnings results here, it’s free.
Weakest Q2: Selective Insurance Group (NASDAQ: SIGI)
Founded in 1926 during the early days of automobile insurance, Selective Insurance Group (NASDAQ: SIGI) is a property and casualty insurance company that sells commercial, personal, and excess and surplus lines insurance products through independent agents.
Selective Insurance Group reported revenues of $127.9 million, down 89.3% year on year, falling short of analysts’ expectations by 90.3%. It was a disappointing quarter as it posted a significant miss of analysts’ EPS and book value per share estimates.
Selective Insurance Group delivered the weakest performance against analyst estimates and slowest revenue growth in the group. As expected, the stock is down 13.4% since the results and currently trades at $78.32.
Read our full analysis of Selective Insurance Group’s results here.
RLI (NYSE: RLI)
Founded in 1965 and named after its original focus on "replacement lens insurance" for contact lens wearers, RLI (NYSE: RLI) is a specialty insurance company that underwrites property, casualty, and surety products through wholesale brokers, independent agents, and carrier partnerships.
RLI reported revenues of $499.8 million, up 20% year on year. This result surpassed analysts’ expectations by 11.7%. Zooming out, it was a mixed quarter as it also logged a beat of analysts’ EPS estimates but a significant miss of analysts’ book value per share estimates.
The stock is down 6.6% since reporting and currently trades at $64.76.
Read our full, actionable report on RLI here, it’s free.
Mercury General (NYSE: MCY)
Founded in 1961 and maintaining a network of over 6,300 independent agents across the country, Mercury General (NYSE: MCY) is an insurance company that primarily sells automobile insurance policies through independent agents in 11 states, with a strong focus on California.
Mercury General reported revenues of $1.48 billion, up 13.2% year on year. This number beat analysts’ expectations by 2%. Overall, it was a stunning quarter as it also put up a beat of analysts’ EPS estimates and an impressive beat of analysts’ net premiums earned estimates.
The stock is up 16% since reporting and currently trades at $81.50.
Read our full, actionable report on Mercury General here, it’s free.
Market Update
The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.
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