The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Root (NASDAQ:ROOT) and the rest of the property & casualty insurance stocks fared in Q3.
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 strong Q3. As a group, revenues beat analysts’ consensus estimates by 14.7%.
Thankfully, share prices of the companies have been resilient as they are up 5.5% on average since the latest earnings results.
Best Q3: 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 $387.8 million, up 26.9% year on year. This print exceeded analysts’ expectations by 4.5%. Overall, it was an incredible quarter for the company with a beat of analysts’ EPS estimates and a solid beat of analysts’ net premiums earned estimates.
Unsurprisingly, the stock is down 18.6% since reporting and currently trades at $72.89.
Is now the time to buy Root? Access our full analysis of the earnings results here, it’s free for active Edge members.
Assured Guaranty (NYSE:AGO)
Serving as a financial safety net for over $11 trillion in debt service payments since its founding in 2003, Assured Guaranty (NYSE:AGO) provides credit protection products that guarantee scheduled payments on municipal bonds, infrastructure projects, and structured finance obligations.
Assured Guaranty reported revenues of $207 million, down 23% year on year, outperforming analysts’ expectations by 12.2%. The business had an incredible quarter with a beat of analysts’ EPS and revenue estimates.
The market seems happy with the results as the stock is up 11.2% since reporting. It currently trades at $90.63.
Is now the time to buy Assured Guaranty? Access our full analysis of the earnings results here, it’s free for active Edge members.
Weakest Q3: Progressive (NYSE:PGR)
Starting as a small auto insurance company in 1937 with a pioneering focus on high-risk drivers, Progressive (NYSE:PGR) is a major auto, property, and commercial insurance provider that offers policies through independent agents, online platforms, and over the phone.
Progressive reported revenues of $22.51 billion, up 14.2% year on year, in line with analysts’ expectations. It was a softer quarter as it posted a significant miss of analysts’ EPS and book value per share estimates.
As expected, the stock is down 5.7% since the results and currently trades at $226.63.
Read our full analysis of Progressive’s results here.
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 $1.58 billion, up 3.6% year on year. This number beat analysts’ expectations by 6.7%. It was a stunning quarter as it also recorded a beat of analysts’ EPS estimates and an impressive beat of analysts’ revenue estimates.
The stock is up 17.8% since reporting and currently trades at $93.94.
Read our full, actionable report on Mercury General here, it’s free for active Edge members.
Skyward Specialty Insurance (NASDAQ:SKWD)
Founded in 2006 to serve markets where standard insurance coverage falls short, Skyward Specialty Insurance (NASDAQ:SKWD) provides customized commercial property, casualty, and health insurance solutions for underserved or specialized market niches.
Skyward Specialty Insurance reported revenues of $382.5 million, up 27.1% year on year. This print topped analysts’ expectations by 14.3%. Overall, it was a stunning quarter as it also put up an impressive beat of analysts’ net premiums earned estimates and a solid beat of analysts’ revenue estimates.
The stock is up 11.3% since reporting and currently trades at $51.83.
Market Update
In response to the Fed’s rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed’s 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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