Latest P&C Ratings Show Industry is Strengthening – But the Hit from Mother Nature Will Come Soon

The Property and Casualty (P&C) insurance industry took several major hits this year, with hurricanes in the East and wildfires in the West. These events were truly catastrophic for the people involved — but the full extent of their cost to insurance companies and the taxpayers is still not entirely clear.

That’s because the hurricanes hit in late August and September, while the wildfires raged in October. Claims are still being filed, so insurers won’t be able to give accurate estimates of related costs until the end of year filings.

In the meantime, we just published our latest ratings of over 2,300 P&C insurers. Many of these insurers do not cover home or business properties affected by the recent catastrophes. But in any event, the trends are encouraging overall …

• Eighteen insurers received an upgrade to their safety rating, while 15 received a downgrade.
• The overall P&C safety ratings distribution improved from a year ago. We had 3.7% more insurers in the “A” and “B” ratings categories in Q2 2017 than in Q2 2016. There were 2.1% fewer “D” and “E” rated insurers, and 1.7% fewer “C” companies.

* On a quarter-over-quarter basis, 18.6% fewer companies earned our weakest “D” or “E” grades. That continued the downward trend since Q4 2016. Recommended insurers, those rated “B+” or higher, represented 3% of the industry, unchanged for two consecutive quarters.

In the graph below, the weakest companies are marked by the red line, with the percentage that they represent in the industry on the left. The recommended companies are represented by the green line and correspond to percentages on the right-hand side.

It’s not just the individual P&C companies that appear to be in a pretty good shape. It’s also the publicly traded parent companies that own them. Nearly half, or 44.4%, of insurance industry stocks are BUY rated. Another 38.6% are rated HOLD, while only 17% are rated SELL.

To find some of the best investment candidates, I used the Weiss Ratings’ Stock Screener. I searched for BUY rated stocks in the insurance industry with above average one-, three-, and five-year total returns that also pay above average dividends. Only five made the cut. Each one of these has diversified business portfolios with various types of insurance and even some financial services, and you may want to consider them for your portfolio.

Insurance Stocks with Highest Total Returns and Dividends

Data Date 10/23/2017

Bottom line: Individual insurance companies have nearly a month to file their third quarter results. Those figures should reveal much more about how the P&C industry fared during and after the storms and wildfires. Some will certainly report worse than typical performance. But based on strong current ratings, the industry and affected companies should have an easier road to recovery.

Just make sure you stay on top of your insurance company by adding it to your Watchlist link. Then we can let you know if its rating changes.

Think Safety,

Gavin Magor

Insurance Insights Edition, By Gavin Magor, Senior Financial Analyst Gavin has more than 30 years of international experience in credit-risk management, commercial lending and insurance, banking and stock analysis and holds an MBA. Gavin oversees the Weiss ratings process, developing the methodology for Weiss’ Sovereign Debt and Global Bank Ratings. Gavin has appeared on both radio and television, including ABC and NBC as an expert in insurance, bank and stock ratings and has been quoted by CNBC, The New York Times, Los Angeles Times, and Reuters as well as several regional newspapers and trade media.